9 Ways to Pay for Retirement

Setting up several sources of income can protect your retirement security.

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Workers typically depend on steady paychecks from a single employer. But retirees often have several sources of income, including Social Security, retirement accounts, and maybe even a part-time job. This diversification of income can protect you if one of your revenue streams dries up. Here are nine potential sources of retirement income:

Social Security. Social Security is the most common form of retirement income. Some 83 percent of retirees say their monthly Social Security checks are a major (48 percent) or minor (35 percent) way they pay for retirement, according to a recent Gallup and Wells Fargo survey. The amount you will receive changes based on how much you earn during your 35 highest earning years in the workforce and the date you first sign up for payments. Your benefit increases for each year you delay claiming between ages 62 and 70.

[See 10 Ways to Boost Your Social Security Checks.]

Retirement accounts. Most retirees (81 percent) also have a 401(k), IRA, Keogh, or other retirement savings account. However, only about a third (38 percent) of retirees say withdrawals from these accounts are a major source of retirement income. In contrast, almost three quarters (74 percent) of current workers expect their 401(k) to provide the bulk of their retirement income. "These kinds of self-directed investments are replacing a lot of what used to be provided by pensions," says Dennis Jacobe, chief economist for Gallup. "Workers are going to have to rely more on their own resources than the people who are retired now." Most workers (77 percent) say the value of their investments will be a factored in when they choose to retire.

A pension. Almost half (49 percent) of the retirees surveyed say a traditional pension provides a significant source of their retirement income. Far fewer workers (39 percent) expect to receive the majority of their retirement money from a pension plan, Gallup found.

Home equity. Retirees can use their home equity to help fund retirement by downsizing to a smaller house or condo or taking out a reverse mortgage. About a third of retirees and current workers say they are using or plan to use their home equity to finance a significant portion of their retirement expenses, even as housing values plummet. And 36 percent of current workers say the value of their home will have a major impact on when they are able to retire. Financial advisers urge caution when using your home to fund retirement. "People who are looking to retire on the equity in their home are often disappointed," says Marcia Tillotson, a financial advisor for Wells Fargo Advisors in Charlotte, N.C. "When you use home equity, you are going into debt and borrowing from your home. Once you are in retirement, the only way you can pay that money back is to sell your home."

[See Investors Whose 401(k)s Recovered Fastest.]

Stocks and mutual funds. Over half (57 percent) of the retirees surveyed say they feel comfortable investing in the stock market in retirement and 30 percent of retirees receive significant income or dividends from individual stocks or stock mutual funds. Tillotson says seniors invested in the stock market may need to tighten and loosen their belt in retirement, depending on how the market performs. "When we have a really good year in the market, maybe that's the year you take the trip," she says. "If we have a down year, that's not a year to trade in your car."

Part-time work. Many people plan to keep working after age 65 because they need the money and enjoy working. "It's not an unreasonable expectation for people today to expect to be healthy enough to work for some period of time after they hit the traditional retirement age," says Jacobe. However, significantly more Americans plan to work part-time in retirement (78 percent) than retirees actually do (29 percent). Health problems and layoffs often force people into retirement earlier than planned. "The reality is that something happens with their health and not as many people work after they retire as once thought they would," Jacobe says.