How Will You Pay for Retirement?
Have you ever heard the expression: “Don’t put too many eggs in one basket?” It’s a phrase that can and should be applied to your retirement, particularly when you’re determining how you’ll pay for your work-free years. There are several ways retirees can make sure they’re paying their bills, and often, it makes sense to utilize more than one of them. Ready to see how you can fund your golden years? Here are three ways U.S. seniors are paying for their retirement.
1. Retirement Savings
A survey released by Gallup reveals that 36 percent of U.S. retirees rely on a pension plan, while 23 percent get money from a 401(k), IRA, or other retirement savings account. The survey states that pension plans appear to be a major factor in determining retirees’ standard of living, particularly since it is the most commonly cited income source among seniors whose annual household income is at or above the U.S. median of about $50,000.
Interestingly, the retirement landscape could soon see a shift. More non-retirees expect to rely on self-directed retirement savings accounts and less on pensions and Social Security, which current retirees rely heavily on. “But the data suggest the new era of retirement has not necessarily arrived yet — younger and older retirees today largely rely on the same funding sources,” the survey said.
U.S. News & World Report writes that 30 percent of retirees receive income from either a traditional pension or take withdrawals from a retirement savings account such as a 401(k) or individual retirement account, with retirees receiving a median income of $12,000 per year.
Retirees are also using personal savings accounts to help fund their retirement. However, don’t expect to watch your money rapidly grow in a savings account. Low interest rates can prevent seniors from seeing substantial returns on that money. “The Federal Reserve policy keeping interest rates down isn’t good for seniors. They need a magnifying glass to see how much they have been earning on their savings,” Pamela Yellen, author of The Bank On Yourself Revolution: Fire Your Banker, Bypass Wall Street, and Take Control of Your Own Financial Future, said to U.S. News & World Report. “Let’s say you have $250,000 in savings and you planned on earning 4 percent. That’s $10,000 per year. If that drops to 1 percent, as it has now, you end up with only $2,500 per year.”