It's not uncommon for retirees to get significantly less money from the six main sources of income than they had anticipated. Having access to this data can help you better prepare for retirement. Here is a review of the six main sources of retirement income:

Social Security 

Social Security Social Security is the government-funded retirement income program. After paying Social Security taxes for 10 years, workers become eligible for the program, and their benefits are based on their 35 highest-earning years. In 2022, the average monthly benefit was estimated at $1,625.

Personal Savings and Investments

Personal Savings and Investments Retirees may draw from personal savings and investments outside of retirement plans for income during retirement. Many retirees prefer investments that provide monthly guaranteed income over potential returns.

Individual Retirement Account

Individual Retirement Account Traditional IRAs have been around since 1974. Contributions to the traditional IRA may be fully or partially deductible, depending on the individual’s circumstances. By age 73, retirees must begin taking required minimum distributions from their traditional IRA. Withdrawals from traditional IRAs are taxed as ordinary income, and taking them before age 591⁄2 may be subject to a 10% federal income tax penalty.

Contributions to a traditional IRA can continue past age 701⁄2 as long as the earned-income requirement is met. Roth IRAs were created in 1997. High-income earners are not eligible to make contributions to a Roth IRA. To qualify for tax-free and penalty-free withdrawals of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 591⁄2. Tax-free and penalty-free withdrawals can also be made under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.

Defined Contribution Plans

Defined Contribution Plans Workers may be eligible to participate in a defined-contribution plan like a 401(k), 403(b), or 457 plan. Eligible workers can contribute a portion of their pre-tax income into an account that accumulates, tax-deferred. By age 73, you must start taking required minimum distributions from your 401(k) or other defined contribution plan. Withdrawals from the plan are taxed as ordinary income and taking them before age 591⁄2 may be subject to a 10% federal income tax penalty.

Defined Benefit Plans

Defined Benefit Plans Defined benefit plans are “traditional” pensions—employer-sponsored plans under which benefits, rather than contributions, are defined. Benefits are generally based on factors such as salary history and length of employment. The number of traditional pension plans has decreased significantly over the last 30 years.

Continued Employment

Continued Employment In one survey, 71% of workers stated that they plan to keep working in retirement, while only 31% of retirees reported that continued employment was a major or minor source of retirement income.

Expected Vs. Actual Sources of Income in Retirement

Understanding the different sources of retirement income can help you plan for your financial future. It is important to consult with a financial advisor to determine which sources are best for your individual circumstances.