Shocking Study: IRAs & 401(k)s Provide Under 20% of Retirement Income!
When it comes to securing your financial future in retirement, IRAs and 401(k)s are often hailed as the golden tickets. But hold on a second—recent research has shed light on a surprising truth: these retirement accounts may not be the powerhouse of income we’ve been led to believe.
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The 2024 Spending in Retirement Survey, which gathered insights from 3,600 American retirees aged 62 to 75, reveals eye-opening details about income sources for this group.
The findings are revealing: only 20% of retirees lean on IRAs for their income, while a mere 17% rely on 401(k)-style plans. Even more surprising is the modest impact these accounts have on overall income—IRAs contribute just 10% and 401(k)s offer a slightly better 15%.
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It turns out, IRAs and 401(k)s are just pieces of a much larger retirement income puzzle. Their relatively small contribution underscores the significance of diversifying your income sources as you prepare for retirement.
One of the heavyweights in the retirement income arena is Social Security, with nearly 92% of individuals aged 65 and older tapping into this vital program, according to Federal Reserve data. Additional income sources shared by retirees include:
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Pensions (56%)
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Interest, dividends, or rental income (42%)
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Wages, salaries, or self-employment (32%)
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Cash transfers, other than Social Security (9%)
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Retirement can be a tough financial landscape, especially when income falls short of expenses. According to reports, the median annual income for Americans aged 65 and older stands at $50,290, while their average annual expenditures hover around $57,818.
With the average Social Security check nearing $1,900, it often covers only about 40% of a beneficiary’s preretirement income. For those relying primarily on this source, there’s a significant gap that needs addressing. Financial experts advise aiming to replace 70-80% of your preretirement income, making it clear that Social Security alone won’t cut it.
