The top 10 sources of retirement income

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Most people expect to have several sources of retirement income including Social Security, a retirement or savings account and increasingly a part-time job. Less common ways to pay for retirement include tapping your home equity or purchasing an annuity or rental property, according to a recent Gallup poll. Here are 10 ways to pay for retirement:

[See: 12 Ways to Increase Your Social Security Payments.]

Social Security. Social Security is the most common source of retirement income, with 88 percent of retirees saying they rely on the steady stream of payments and 55 percent calling Social Security a major source of their retirement income, Gallup found. Just under a third (31 percent) of workers think Social Security will be their primary way of paying for retirement, but another 51 percent of employees are still counting on Social Security to be at least a minor source of retirement income.

Retirement accounts. Prior to the recession, over half (54 percent) of workers planned to rely on a 401(k), IRA or other retirement account as their primary source of retirement income, but that number has since fallen to 48 percent in 2014. Even fewer retirees (38 percent) use retirement accounts as a major source of retirement income. "The 401(k) is the major source people think they are going to rely on. That's very dangerous because if you are going to rely on it you have to put a lot of money in it," says Frank Newport, editor-in-chief of Gallup poll. "Even Americans in their 50s don't have nearly as much in their 401(k) as they would need to retire."

A pension. Just over a third of retirees (38 percent) say that traditional pension payments are a significant source of their retirement income. Even fewer workers (21 percent) are expecting a steady stream of payments from their former employer in retirement. "People are less likely to think they are going to have a pension," Newport says.

Home equity. Some 18 percent of retirees are using the equity they have built up in their home to help pay for retirement, perhaps using a reverse mortgage or by significantly downsizing and pocketing the extra cash. About the same proportion of workers (18 percent) are hoping that home equity will give their retirement finances a boost. "You have to either sell it and move into a more modest arrangement or take a reverse mortgage arrangement," Newport says.

[See: What Everyone Should Know About IRAs.]

Stocks. Just 11 percent of retirees say a significant chuck of their income comes from individual stocks or stock mutual fund investments. About twice as many workers (20 percent) are hoping the stock market will give their retirement income a lift, Gallup found.

Annuities. An immediate annuity allows you to get a pension-like stream of steady payments throughout your retirement in exchange for handing over a chunk of cash up front. But only about 10 percent of retirees say they have bought an annuity or other type of insurance plan as a retirement income strategy, and just 7 percent of workers plan to do the same.

A savings account. Only 8 percent of retirees say a savings account or CD is a place they keep the majority of their retirement income, although 36 percent consider it a minor source. But 23 percent of workers expect these FDIC-insured accounts to hold a significant portion of their retirement money, and another 43 percent say it will be a minor source of funds.

A part-time job. Many workers expect a part-time job to be a major (19 percent) or minor (46 percent) way they pay for retirement. "In additional to the intrinsic motivation for working, they may need them money," Newport says. Far fewer retirees receive a large (5 percent) or small (14 percent) portion of their income from continuing to work in retirement.

[See: 9 Important Ages for Retirement Planning.]

Rent and royalties. Income from a rental property or intellectual property can be used to help pay for retirement by the people who have this option, which includes 6 percent of retirees and another 7 percent of workers.

An inheritance. While a large inheritance could boost your retirement prospects, it's probably not a good idea to count on receiving one. About twice as many people are expecting to inherit money to help fund retirement (9 percent) as are using an inheritance for retirement (4 percent).

Emily Brandon is the senior editor for Retirement at U.S. News. You can contact her on Twitter @aiming2retire, circle her on Google+ or email her at ebrandon@usnews.com.



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