Retirement & Financial Planning Report

There are five main components to income in retirement, according to a study that found troubling trends emerged during the recent recessionary times.

According to the Employee Benefits Research Institute, sources of income fall into these categories:


* Labor income: wage and salary income; bonuses, overtime pay, commissions, tips; second job; professional-practice or trade income.

* Capital income: business or farm income, self-employment earnings, business income, gross rent, dividend and interest income, trust fund or royalties, and other-asset income.

* Pension/Annuity income: pension and annuity payments from defined benefit pensions, annuities, as well as income from other retirement savings such as 401(k)-type plans and individual retirement accounts (IRAs).

* Social Security income: Social Security retirement, spouse, and widow or widower benefits.

* Other: Social Security disability benefits, unemployment and workers’ compensation, veterans’ benefits, food stamps, alimony, lump-sums from insurance, pensions or inheritance.

Of those, on a nationwide basis Social Security is the largest source of income, with households ages 65–74 and households with members age 85 or above receiving 54 percent and 66 percent of their total household incomes, respectively, from it. Income from pensions and annuities is the second-largest source, making up 17.1 percent of income for the former group and 15.3 percent for the latter.

The study further found that in 2009, two-fifths of households with members age 65 and above had incomes less than their expenditures;14.3 percent spent 175 percent or more of their household incomes. The result is that they drew down their assets. In many cases those expenses were related to uninsured health-related costs.