The Three Pillars of Retirement: Pension, Social Security, and Personal Investment Income
We all have plans (or dreams) to retire one day. While dreams are important, the foundation for retirement is just as critical. Will you have enough money to fund your retirement? Establishing clear personal financial goals and working with a knowledgeable financial planner can help turn those dreams into a reality.
Three Types of Retirement Income
For many Americans, there are three elements of a solid retirement planning strategy: pension income, social security income, and personal investment income. In this blog, we’ll provide an overview of these three types of income and how they contribute to saving for retirement.
Pension income. Once a common benefit among U.S. employers, traditional pensions in the United States are on the decline, with more companies switching from providing direct pensions to outsourcing the process to defined contribution plans such as 401Ks.
According to the Bureau of Labor Statistics using data from March 2023, 73 percent of civilian workers had access to retirement benefits. The take-up rate (defined as the percentage of workers with access to an employer-sponsored benefit who choose to participate) for retirement benefits was 77 percent.
Social Security. While social security can provide some income for day-to-day living, living on social security alone is nearly impossible for people in many parts of the country.
“A popular rule of thumb is that you’ll need about 80 percent of your pre-retirement income to maintain your current lifestyle. Unfortunately, Social Security benefits supply only about half of that if you’re an average earner,” according to SmartAsset.com. Individuals still working can check their estimated benefits on the Social Security website, and see estimates of their benefits at early, standard, and late retirement ages.
Personal investment income. Personal investment income is money earned from the buying, owning, and selling of investments. These investments not only provide capital for living expenses during retirement, but they also generate other income streams, including capital gains, dividends, and interest on the investments from products such as corporate or government bonds or CDs. Designing a long-term investment strategy aligned with your goals is a key element of successful asset management.
Not Everyone Qualifies for All Three
Not all Americans are entitled to or have access to all three of these income vehicles, which means it’s even more important to consult with a knowledgeable financial planner who can provide alternatives to ensure plan stability. This substitution begins with a comprehensive needs analysis, enabling investors and advisors to construct a proposal that highlights the strengths, weaknesses, or limitations their plan circumstances may present.
Choose an Experienced Retirement Planning Partner
Toomey Investment Management, Inc. is a Wallingford, Connecticut-based independent registered investment adviser (RIA) advisory firm that offers clients expertise in independent portfolio management, tax planning and preparation, risk management, and estate planning. Their comprehensive services aim to create a durable, effective wealth management strategy customized to client needs.
A prudently designed retirement income plan is crafted to client specifications with a central focus on flexibility and durability. Whether you’re focused on building wealth, saving for retirement, or securing long-term income, our team is here to help.
When we partner with clients, there is a shared interest in the longevity of the plan. We tell our clients on day one: this is a business of variables, and we aren’t doing our jobs if the product we provide isn’t a durable one.