Sources of retirement income

When you think about retirement, you might imagine yourself traveling the world, spending time with your family, or finally having the time to pursue your hobbies. But, to enjoy your retirement, you must have a steady source of income. In this article, we'll discuss the main sources of income during retirement and how they work.

Social security is a government program that provides a monthly payment to retirees. It is funded by taxes that are taken out of everyone's paycheck. Paying into social security is mandatory for every employee and their employer.

When you work, you pay into the social security system. When you retire, you can apply to receive monthly payments from the system. The amount you receive is based on how much you earned while you were working and how early you retire.

While social security is an important part of retirement, it is typically not enough to live off of. The average monthly social security payment is around $\mathrm{\$}\mathrm{1,700}$‍ ${}^1$‍. This is not enough for most people to live comfortably, so it is important to save for retirement in other ways as well.

Most people save for retirement with the help of their employer through retirement plans like 401(k), 403(b), 457, or pension. These plans are called employer-sponsored plans because your employer is the one who sets up a retirement account for you, and both you and your employer can contribute money to it.

Sometimes, employers even match your contributions, meaning they'll add extra money to your account. This is called a matching contribution. This is a great way to grow your retirement savings faster.

Employer-sponsored plans are usually voluntary, which means you don't have to participate if you don't want to. But if your employer offers matching contributions, it can be a good idea to take advantage of it in order to get some free money added to your retirement savings.

When you retire, you will be able to access the money in your retirement plan. Depending on the type of plan, you might be able to receive a , periodic payments, or a combination of both.

Individual savings for retirement differ from Social Security and employer-sponsored retirement plans in that they are completely under your control. With individual savings, you are the one who decides how much you want to save, where you want to save it, and what types of investments you want to make.

One of the main benefits of individual savings for retirement is that they give you more control over your retirement income. You can choose to save as much as you want, and invest in a variety of different accounts and assets. For example, you might choose to open an Individual Retirement Account (IRA) and make regular contributions to it. Or, you might invest in stocks, bonds, or mutual funds. You might even choose to purchase real estate as an investment.

When you decide to retire, you can access your individual savings in a variety of ways, depending on the type of account or asset you have. For example, with an IRA, you might choose to take withdrawals as needed. With stocks, bonds, or mutual funds, you can sell them to get some money. If you own real estate, you might choose to sell the property or rent it out for additional income.

Social security, employer-sponsored plans, and individual savings are all important sources of retirement income. Each one has its own strengths and weaknesses. While social security benefits provide a steady income, they are often not enough on their own to sustain a comfortable lifestyle in retirement. Employer-sponsored plans can offer additional income, but they may not be available to everyone. Finally, individual savings allow people to take control of their own retirement planning, but they require discipline and foresight. Combining all three sources can help provide a solid foundation for a secure and comfortable retirement.

1 - Social Security website