February 11, 2023

I'm Retired: Where's The Money Coming From?


Isn't this a question we ask about retirement, even if we are "expert" about all things retirement by now? This question is important enough for me to attempt an answer. 

The number one financial fear is whether enough money has been saved and invested, along with expected income from Social Security and maybe a pension. Where does my money come from when the checks stop?

Obviously, I don't know your specifics since the answer depends on your resources and how long you live. But, I do feel comfortable outlining a few basic responses to the question of income and retirement. And I urge you to add a comment at the end of the post if another idea comes to mind.

So, what are the sources of income we depend upon? You might be surprised by the wide range of possibilities.

Social Security

This is the basic foundation that most of us use for our retirement. Nearly 66 million receive a monthly deposit from the government. Roughly 25% of that total are disabled or dependent folks, many under the age of 65.

The amount of the payment is based on too many variables for this post, but the more you made during your working days, the amount of time you were employed, and when you start taking payments determines your monthly check. Delayed acceptance and spousal benefits are other factors. 

In inflationary times, like now, the amount of your payment increases with a cost of living adjustment based on inflation. For 2023 an adjustment of 8.7% helped a bit after seeing rapid price increases over the last few years. The average Social Security check is $1,550 a month. Medicare premiums are deducted from that base amount. In a nice surprise, Part B Medicare costs actually went down about $10 a month this year.

Much is written about the impending exhaustion of the fund that provides the cash for Social Security, or the subject becomes a political talking point. Personally, I expect the age to receive payments will move in increments up to 67, and the payroll tax will cover higher income groups. There is a possibility that benefits could be reduced for a time. But, there isn't any that Social Security will disappear. Tens of millions of us would not allow that to happen.


Frankly, I am surprised that roughly 31% of Americans still receive a monthly payment from their employer under a defined benefit plan. That is down from 42% a few decades ago and is likely to continue to shrink in the years ahead. Companies have found the benefits are too great to maintain, particularly in the area of health care. 

If you worked for the government, you are probably in better shape. Close to 90% of full-time workers continue to receive pensions. Federal workers can receive Social Security as well, but the amount received is reduced by the size of the Federal pension.

To millions of us, a promise to pay doesn't always mean the reality of payment. Under severe financial stress, companies find ways around a pension promise, leaving too many folks in dire straits. Planning your future around a private sector pension that lasts as long as you will, is becoming a bit of a roll of the dice.


If you work for a company that offers a 401(k) retirement plan and contributes a percentage of your salary, this could be an important linchpin in your income stream for retirement. Likewise, a well-funded IRA is often key to a satisfying retirement. Since having both an IRA and a 401(k) is allowed, if you afford to do so, put money in both starting as early as you can. For those over 50, there is a special provision allowing extra money to be put in an IRA each year. 

Remember, the money grows tax-free, but you are only delaying the tax bill that comes due when you withdraw funds. Be sure to take that into account. Make sure you understand the Required Minimum Distribution rules. Once you reach a certain age, you must start to withdraw a predetermined amount from your IRA, or face hefty penalties.

If you have a Roth IRA, that money has already been taxed, meaning it grows and can be withdrawn without any other deductions or timetables until your passing. Under current laws, your heirs will have to withdraw a certain percentage each year. 


This covers things like mutual funds, bonds, and stocks that you have placed money in over the years. While there are some tax consequences, like capital gains tax, your investments provide income as you need it.


This investment choice contains many too many variables and cautions to detail here. If you'd like a simple overview, click this link or search Google for more information. Annuities are designed to provide a fixed monthly income for life from a lump sum of money you turn over to a private company.  I caution you to exercise due diligence in this area. 

Part-time work

For many retirees, some retirement income comes from a part-time job. Depending on the state of the economy and your particular skills, this is one way to supplement other income sources. 


Not that different from part-time work, turning a hobby or skill into retirement income is a natural step for many folks. Love woodworking? Make cabinets or coffee tables. Know how to build a website? Help small businesses establish their presence on the Internet. Love to paint or take stunning photos? Sell them online or in books. Have specific knowledge about a particular industry? Become a consultant. Love teaching children but don't want to be a teacher? Try tutoring.


For the lucky ones among us, parents or relatives will leave you money, investments, or property that can be turned into a source of income. Unless you are quite sure this will happen, I'd strongly suggest you don't build your retirement plan around this possibility.

Hopefully, this list should encourage you. With the eight income possibilities listed here, plus whatever ideas you add, the way to pay for retirement is likely within your grasp.


  1. On a lighter note, I once asked my brother-in-law, who left work at age 55, what his secret was to an early retirement. His answer: A working wife!

    1. Not touching this one ( though made me smile).

  2. I retired at 58 and draw a monthly allowance, equal to what I brought home minus post-tax investment savings. This currently comes from my IRA which was conversion of my 403b $ upon retirement. I also convert from my IRA to my Roth each year within our tax bracket max while the rates are down as this reduction expires in 2025. As well, most years I'll do a tax deductible Roth conversion.

    Hubster has a pension fund although it is HIS money. Our state does a mandatory withholding/investment percentile and there is an agency that manages those funds. They've done a good job of it over the decades. He has no retirement health benefits attached to the employer.

    I had a small inheritance from Mom and spent it on her grandchildren, traveling and downhill skiing.

    Along with SSDI, we'll be fine for the long haul. Being debt free and a homeowner before retirement offers a LOT of "I am okay" feels. I cannot imagine having debt to service and worrying about interest rates or paying rent with someone else in charge of my housing.

    1. Ugh, not SSDI but SSI (no disability here).

    2. Entering retirement debt-free is not all that common, but a tremendous situation to aspire to if still employed. We bought our last two homes for cash, so have been without a mortgage for 18 years. The lack of mortgage payments makes a huge difference in both the economics and feelings of safety during retirement.

      When we move to a continuing care community there is large buy-in cost, as well as monthly fees. Mentally, that will be an adjustment.

    3. Most people I know, including my wife and I, have lived quite comfortably on just pension and social security income for decades. It's not complicated. In fact, many retirees are really millionaires but don't know it. If a retiree has income of at least $47,000, that is the equivalent of 1 million dollars in the bank. Also, many retirees, including my wife and I, have withdrawn very little 401k money, except for minimum distributions. In other words, often retirees have more money in their accounts than when they retired. That's why I'm spending a lot of my income on rich experiences.

      I'm thankful that I have the advantage of living in a state that is most affordable for retirees, Michigan, and having a spouse with SS income and pension in addition to mine. Consequently, I'm not the least bit anxious about running out of money. I also know that more income streams will not make me more "secure". Security is an illusion. Dick Van Dyke said it best, "I've made peace with insecurity because there is no security of any kind."

    4. Like you, our investments grow by more than we spend. Social Security for us both and the RMD from one of our IRAs covers what we need in a year. There is no need for additional income sources.

      Only for large vacations do we dip into savings. Then, the following year we stay closer to home and watch the investments fill up the pot again.

      It is a "secure" way to live.

  3. Two additional options to consider . . . 1. Rental properties. This option certainly isn't for everyone, but it can be helpful in certain situations. We bought a small commercial property about 10 years ago as an additional income stream. It worked well for us because Alan is mechanically inclined and can fix almost anything. So it was fairly easy and inexpensive for him to maintain the property himself. That being said, we just sold the property last year because the landlord-tenant laws in our state were becoming more and more restrictive toward landlords. Two of the most recently proposed changes would prohibit a landlord from considering a prospective tenant's credit score and criminal history during the application process. If those proposed changes did become law, we would have no way of predicting cash flow or keep our current residents safe from potentially dangerous criminals. During the nearly 10 years we owned the property, it provided a steady income and we have no regrets about the purchase. However, I would caution anyone who may consider buying rental property to review the landlord-tenant laws in their state first to be sure that they can live with them.

    2. "Invisible" income. In the grand scheme of things, what I call "invisible" income may not produce a living wage, but it does add up. In this category, I include cash back from credit cards, discounts we get through various memberships such as AARP, and loyalty programs related to our State Parks and various hotel chains. (I just booked a free night at a hotel using my points for an upcoming visit to out of state family members, and earlier this year I booked two free nights of camping at one of our favorite State Parks.) Then there's Alan's Interagency Senior Pass from the federal government that provides us with free entrance to National Parks and 50% off camping fees at federally run campgrounds. And membership in local grocery chains customer loyalty programs through which we earn free products, cash back for purchasing generic products and a free gallon of milk after purchasing five. I also use shopping portals like TopCashBack and Rakuten to earn back a percentage of purchases I'm going to make anyway through participating retailers. The shopping portals even partner with hotel chains and other travel-related businesses - unexpected, maybe, but definitely helpful and appreciated. A couple of years ago, Alan suggested tracking the "invisible" money we save since I already track expenses. In 2021, those savings totaled $1,800.00. In 2022, the total was $2,400.00. Like I said, not a living wage, but definitely not chump change either.

    1. Thanks for mentioning both points. We were landlords for several years. At one point we owned four rental houses. But, with me traveling and some bad experiences with tenants, we decided that was not a good fit for us.

      BTW, that proposed tenant law change is ridiculous. I don't object to renting to someone trying to turn their life around. I worked with enough ex-cons to know many deserve a second chance, and credit scores not the only measure of dependability.

      But, the landlord must be allowed to enter into a relationship with eyes open and be allowed access to all information.

      The "invisible" income is something I have never given much though to; you are right. Those perks and discounts are nothing to be ignored. I get 10% off at Dennys and feel like a winner!

    2. I love love love my invisible income! We've done a great deal of free travel over the decades . Last year alone I used points for over $2000 in expenses. If I had to guess, I'd say at least $50,000 to date.

  4. I think one of the biggest challenges in retirement is moving from a single source of income (i.e. your paycheck) to multiple sources of income. As you show above there is more than one source of income in retirement and they all need to be managed one way or another. When do I take Social Security, earlier or later? How much do I take from my retirement savings accounts, and which accounts? If you think you might have some inheritances, how much and when (who knows)? Even, as you say Bob, how secure is your company pension? Taxes need to be paid on each source too. There's a lot to consider and manage on an on-going basis. It's not just retire and live on Easy Street.

    It is often surprisingly difficult to determine how best to use your financial resources so that you can have the retirement you dreamed of and also not run out of money in your later years. It's a tough balancing act that I think many of us err on the side of being too cautious, don't have the retirement we could have enjoyed, and end up dying with most of our retirement savings still intact (which will only benefit some combination of the IRS and your heirs). It's up to each individual of course but don't be too cautious, especially in the early and most healthy years, only to find out in your later years that you have more money than you need but not the inclination or health to enjoy it.

    1. I have become a believer in what David preaches: enjoy some of the fruits of your investments and savings while you are able. In many cases retirres will leave this world with a fair amount of those monetary resources untouched.

      We have pledged to leave our daughters with a decent inheritance. Even so, until rather recently, we have been overly cautious in what we permit ourselves.

  5. I worked for the state government, so I get a pension, but my social security is minimal because of it. My husband gets a pension also, but has better social security because he had enough quarters in the system to be grandfathered in. He also gets VA disability. And OUR HOUSE WILL BE PAID OFF IN SIX MONTHS! That will be a financial boon!

    1. Congrats on retiring your mortgage. That is a big deal and something to be proud of. I imagine it will feel like you just got a raise!

  6. This was the aspect of retirement I found most daunting at first. How much money did I have and how could I make sure I was not overspending? I am actually lucky in having more income than I need from Social Security (which I waited until I was 70 to take to maximize the monthly benefit) and required minimum distributions from my 403 (b) retirement funds. It took a year or two, but eventually I figured out how to set up a monthly budget with how much I have coming in and where it is going, which I find very reassuring.