Retirement savings plans like IRAs and 401(k)s are often touted as important tools for staying safe. Financial security after retirement. But new research from the Employee Benefits Research Institute (EBRI) reveals that these accounts play a surprisingly limited role in retirees' total income.
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The 2024 EBRI Retirement Expenditure Survey of 3,600 American retirees ages 62 to 75 provides new insight into this group's income profile.
According to the study, IRAs provide income for 20% of retirees, and 401(k)-style workplace retirement plans provide income for 17%. However, the contribution of these plans to the total income is small. On average, IRAs account for 10% of a retiree's income, and plans like 401(k)s account for 15%.
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IRAs and 401(k)s are just one part of a complex retirement income picture. The relatively small proportion of these funds in total retirement income illustrates the importance of other sources of income in retirement.
social security According to Federal Reserve data, nearly 92% of retirees age 65 and older benefit from this program, making it an important source of income for many retirees. Other sources of retirement income from this data include (along with the percentage of retirees with that source):
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Pension (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 benefits other than social security (9%)
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Retirees face financial problems when their income and expenses don't match. According to a report by The Motley Fool, the average annual income is Americans 65 and older The average annual expense is approximately $57,818, while the average is $50,290.
The average Social Security check is nearly $1,900 and often only replaces about 40% of a beneficiary's pre-retirement income. For retirees who rely primarily on this source of income, there is a huge gap to fill. Financial experts recommend having a goal of saving or finding a sufficient source of retirement income to replace 70-80% of your pre-retirement income. In other words, social security alone is not enough.
