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Where Does the $$ Come From?
Now that you now have an idea of how much
you'll need for your retirement, you need to figure out where
the money will come from.
The following table gives you an idea of
what you can expect:
Sources of Retirement Income
- Personal Investments/Savings
-- 34%
- Social Security -- 21%
- Pension -- 19%
- Other -- 2%
As you can see, planning for the future
plays a huge part in achieving your retirement goal. A large
portion of your retirement income will come from your personal
investments/savings -- something that you can work on right
now.
Additionally, you'll notice that there's
another 24% of this chart missing. That's because the average
retiree falls about 24% short of their retirement goals.
You can either make that up by taking a
part-time job; hardly what you probably had in mind for your
retirement; or you can concentrate on making good investment
decisions. Now you see the importance of a well-planned retirement
program.
The Different Kinds of Fuel: Retirement
Sources Explained
Social Security
In effect, Social Security is an automatic
savings plan. Even if you have not begun to save for your
retirement, you essentially have through Social Security.
That's the good news. The bad news is that it's not enough
to live on comfortably.
How much Social Security can you expect
to get per month when you retire? It depends on what your
average yearly employment earnings are:
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Average
Annual
Earnings
|
Social
Security
Benefit
|
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$10,000
$20,000
$30,000
$40,000
$50,000
$60,000+
|
$500
$750
$910
$1,030
$1,130
$1,200
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Note that these benefit amounts are for
individual income earners. If you have a spouse who doesn't
earn an income, they will collect half of what your benefit
is. Working spouses can collect individual benefits or half
of their spouse's -- whichever is more.
To be eligible for Social Security, you
must work a minimum amount of fiscal quarters. Currently,
if you reach age 62 after 1990, you need 40 quarters of work
credits to qualify for Social Security benefits. To find out
more about Social Security, you can call the Social Security
Administration at 1-800-772-1213.
Despite talk about overhauling the Social
Security system, you should be able to count on it being there
when you retire, no matter how old you are today.
Pension
Many employers offer pension plans. These
plans let you qualify for a monthly benefit amount to be paid
to you in retirement based on how long you worked for that
company. Typically, you can expect to be paid about 1.5% of
your salary for each year of full-time employment with that
company. Think of pension money as an account that is waiting
for you when you retire.
Personal Investments/Savings
Your personal investments/savings include
your tax-deferred assets, which include things such as your
401(k) plan or IRA, and your taxable assets. As illustrated
in the chart above, your savings will make up the bulk of
your investment income. Because of this, it is critical to:
Start saving now!
- Allocate your assets wisely.
- Remember that you have the responsibility
to create a comfortable retirement for yourself.
Other
Other sources of retirement income might
include public assistance, inheritances, payments from a lawsuit,
or anything else that generates income for you. You can't
count on having too much of this kind of income at your retirement
-- which makes your investment income that much more important.
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