Turning savings into income
Your retirement strategy should consider how various income sources can come together to fund your retirement. While most expect to receive Social Security benefits and draw from savings in an employer's retirement plan, only some have other savings and investments. In addition to Social Security and retirement plan savings, our survey respondents indicated that they expect to receive income from individual retirement accounts, savings accounts, money market accounts, certificates of deposit, stocks, bonds, mutual funds and pension plans.
|Retirement Income Source||Percentage|
|Individual retirement accounts (IRAs)||54%|
|Savings accounts, money market accounts, certificates of deposit||45%|
|Stocks, bonds, mutual funds||40%|
|Former employer's pension plan||26%|
|Current employer's pension plan||13%|
Reviewing your sources and making the switch from saving to generating income may be a challenge. After all, there are a lot of options, and figuring out which financial products best fit your needs can be tough.
According to our survey, 73 percent of respondents prefer a blend of income options — combining annuities, mutual funds and bank products — instead of putting savings into a single guaranteed income product or all liquid investments, like stocks or saving accounts, to which they could have immediate access through selling or taking a withdrawal. That can be a smart move, since you're not putting all of your financial "eggs" into one basket.
The survey also reveals a need for professional help when it comes to retirement income planning. Nearly 40 percent of those surveyed, for instance, don't know what they'll do with the savings in their employer's retirement plan when they retire or change jobs. And 38 percent don't know what a guaranteed income product is. (An annuity is a good example.)
Clearly, there's value in working with a financial professional who can explain the options. You can also get helpful tips from noted financial journalist Jean Chatzky in this video. She suggests some things to keep in mind as you create an income strategy for retirement.
For a deeper dive into this topic, check out our Shifting Gears seminar. The third section of the seminar focuses on turning savings into retirement income.
Don't put off planning for retirement income.
Find a financial professional with whom you can work now and in retirement.
A money market investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in money market funds.
Investment options are subject to investment risk. Shares or unit values will fluctuate and investments, when redeemed, may be worth more or less than their original cost. It is possible for an investment option to lose value.
Jean Chatzky is a compensated financial commentator, is not affiliated with any company of the Principal Financial Group and the views she expresses are not necessarily those of any member company of the Principal Financial Group.
Insurance products from the Principal Financial Group® are issued by Principal National Life Insurance Company (except in New York) and Principal Life Insurance Company. Plan administrative services are provided by Principal Life. Securities are offered through Princor Financial Services Corporation, 1-800-247-1737, Member SIPC. Princor®, Principal National and Principal Life are members of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.