That aligns with a 2024 survey from the Transamerica Center for Retirement Studies, which found that 32% of Americans expect Social Security to be their primary source of retirement income. Twenty-nine percent think their retirement investment accounts, like 401(k)s and IRAs, will be their primary sources of retirement income.
Retirees are more likely to have Social Security fulfill their income requirements than non-retirees. 53% of retirees surveyed by the Transamerica Center believe Social Security will be a primary source of income throughout their retirement compared to 25% of non-retirees.
Data from the Social Security Administration suggests workers may be more clear-eyed about how much they’ll rely on Social Security in retirement. In their analysis, 40% of retirees rely on Social Security for 50% or more of their income, and 14% rely on it for 90% or more.
“If ‘major source’ means 50 percent or more, then it seems like the expectations of near retirees are in line with reality,” Munnell said.
Still, mismatched expectations about expected sources of retirement income can complicate retirement planning. Bond told The Motley Fool that they may stem from workers not appreciating the amount of savings they’ll need to have a comfortable retirement.
Based on research from the National Institute on Retirement Security, “most significantly overestimated how much annual income that amount of savings would provide,” Bond said. “As a result, Social Security benefits often become a more important source of retirement income than many expect.”
Two other factors can complicate retirement income planning, Bond said: the timing of retirement and how long retirement will last.
A 2024 study by the Transamerica Center for Retirement Studies found that 58% of retirees retired sooner than planned, in large part due to health or employment issues.
Retiring earlier than expected complicates retirement income planning, Collinson said. “First, it cuts short one’s time horizon for bringing in income and employee benefits, growing one’s savings, and smoothly transitioning. Secondly, most retirees claim their Social Security before their full retirement age at a reduced monthly benefit.”
14% of retirees report working for pay in the last month
Returning to work is a way for those in retirement to augment their income. Fourteen percent of retirees report doing some work for pay in the last month, according to the Federal Reserve. Eleven percent reported doing part-time work, and 3% reported doing full-time work.
Fifty percent of retirees surveyed by The Motley Fool are considering going back to work due to what they consider an inadequate Social Security cost-of-living adjustment.
The decision to return to work in retirement is not necessarily always driven by financial need. “The essential question to ask here is whether retirees are returning to work because they want to or because they have to. It is likely a mix of both,” Bond told The Motley Fool.
That may represent a shift in thinking about retirement, Collinson said. “There’s a growing trend of people working in retirement. Today, people view retirement entirely differently from past generations.”
A 2024 survey from the Transamerica Institute and Transamerica Center for Retirement Studies shows that 54% of workers plan to continue working after they retire. Among retirees surveyed, 8% expect to always work.
The Transamerica Center found that 26% of Americans expect some retirement income from working, and 11% think working will be their primary source of income in retirement. However, just 4% of those currently retired say they work for income, while 33% of non-retirees expect work to provide income in retirement.
Younger, less educated, and more recent retirees are most likely to work
Retirees who worked for pay in 2024 were more likely to be recently retired, younger, and less educated than those who opted not to work, according to data from the Federal Reserve.
For example:
- 17% of retirees with at least a bachelor’s degree worked for pay compared to 10% with a high school degree or less.
- 38% of retirees who retired in the last year worked for pay compared to 10% who retired five or more years ago.
- 11% of retirees over 65 worked for pay compared to 14% of all retirees.
How to diversify your retirement income
Having more than one source of income in retirement can be the key to a financially comfortable retirement. That’s backed by survey data that shows the retirees with multiple sources of retirement income are more financially comfortable, particularly if they’ve managed to reduce their reliance on Social Security.
The first step in diversifying retirement income is building a retirement plan, including when you want to retire and estimating how much money you’ll need in retirement to be financially stable.
From there, you can devise a retirement savings strategy that will likely center around a tax-preferred retirement investment account, like a 401(k) or IRA. Annuities, savings, and real estate can be used to further diversify income in retirement. As you approach retirement, consider different ways to sustainably turn those savings into retirement income.
Getting ready for retirement will always come with uncertainties. Having a few clear, fundamental goals to build toward, like diversifying your sources of cash, can reduce some of that uncertainty and lead toward a more comfortable retirement.
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