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?

Three Types of Retirement Income

For many Americans, there are three elements of a solid retirement: pension income, social security income, and personal investment income. In this blog, we’ll provide an overview of these three types of income. 

Pension income. Once a common thing 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 (which is defined as the percentage of workers with access to an employer-sponsored benefit who choose to participate in the benefit) 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 (money that results when investments increase in value), dividends (shares of company earnings based on investments) and interest on the investments from products such as corporate or government bonds or CDs. 

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 advisor who can make a substitution to ensure plan stability. This substitution begins with a comprehensive needs analysis, which enables investors and advisors to construct a proposal that highlights the strengths, weaknesses or limitations 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. 

A prudently designed retirement income plan is crafted to client specifications with a central focus on flexibility and durability.  

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.