The 4 Major Sources of Retirement Income

Social Security and continued employment are the primary ways Americans pay for retirement.


Social Security is the largest source of income for Americans age 65 and older, according to a new Employee Benefit Research Institute analysis of Census Bureau data. Earnings from work are also increasingly becoming a necessity for seniors. While about half of seniors have some sort of retirement investments, income from assets makes up only a small fraction of the typical retiree’s budget. Here’s a look at the four major sources of income most retirees rely on.

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Social Security. Almost all Americans (89 percent) age 65 and older receive Social Security payments. Social Security provides an average of 40 percent of income for retirees. Seniors in the lowest income quintile received 88 percent of income from Social Security, compared to 19 percent among high income retirees. The oldest seniors also derived a greater share of their income from Social Security than the youngest retirees.

Employment. Some Americans (20 percent) continue to work after age 65. Income from working makes up 26 percent of the typical senior’s income. Younger seniors are more likely to work than older retirees. Among those age 65 to 69, 41 percent of income is from employment compared to 7 percent for individuals age 85 and over. Employment is the largest source of income for the wealthiest seniors.

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Pensions and annuities. Just over a third (35 percent) of current retirees have pension or annuity income. These guaranteed retirement payments typically account for 20 percent of a senior’s income.

Assets. Asset income makes up about 13 percent of the typical retiree’s budget. Just over half (55 percent) of Americans age 65 and older receive some sort of returns from assets. While the lowest quintile of retirees generally receive just 4 percent of their income from investments, the wealthiest retirees earned 18 percent of their pay from assets.

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The median income for Americans age 65 and older in 2009 was $18,001 and the average income was $28,778.