Retirement readiness: Combining sources for a sustainable income

September 13, 2023

retired couple meeting with financial professional

Diversification is a common investment strategy for many. Not only are workers encouraged to diversify within a portfolio, many will need to rely on a diverse range of income sources in retirement.

That’s because Social Security — which pays just over $1,800 each month, on average — typically can’t be relied upon as a sole source of income for most. It represents only 30% of the income of the elderly.1 

Combining the guaranteed income of Social Security with other assets is a key to planning a sustainable, long-term retirement strategy. Let’s assess the most common sources of retirement income that can help alleviate economic hardships.

Social Security

Maximizing Social Security benefits is one of the simplest ways to increase monthly retirement income. Delaying Social Security until full retirement age or longer will result in higher monthly payments than claiming at age 62. This is common knowledge among many plan sponsors and financial professionals, but workers may not fully understand how vast of a difference there can be. Individuals should visit to verify their full retirement age based on the year of their birth.

Do employees realize that waiting until age 70 to claim Social Security benefits could result in a 77% increase in their monthly benefits compared to claiming at age 62?2 What might that look like in real dollars?

If a person would normally receive $1,000 at age 62, they’d receive $1,770 by waiting to claim at age 70. A worker would be hard-pressed to find a type of investment that could promise (and deliver) those types of returns.

That doesn’t mean a person has to wait until age 70 to retire from the workforce. With a proper strategy, they could still retire sooner and live off other income sources until they’re able to claim their maximum benefits. Even waiting a few years longer than age 62 will reap rewards.

Defined contribution funds

Employer-sponsored 401(k) and 403(b) accounts and others are a major benefit for workers. Matching funds from an employer can serve as an added incentive for employees to divert a portion of their earnings to these types of accounts. 

Workers are often encouraged to contribute the maximum allowable amount to their employer-sponsored accounts as part of a broader financial plan. Currently, about seven in 10 private industry workers have access to a defined contribution plan, but only 75% of them participate in such plans, meaning there is room for improvement.3

Plan sponsors have a responsibility to act in the best interests of their employees by providing reputable investment products and services that carry an appropriate level of risk. Educational meetings, literature and online resources can help ensure that employees are fully aware of the potential benefits and how a defined contribution plan can help them plan for retirement. Helping to ensure employees are fully informed about their investment options and feel confident in their choices may help increase take-up rates.

Plan sponsors are well aware of the ins and outs of these types of plans and how they allow employees to invest pre-tax dollars in the market. Unlike Social Security, high-yield savings accounts, bonds, or certificates of deposit, however, employees need to understand that their earnings are not guaranteed.

Paying off debt

While minimizing debt isn’t technically considered a future income source, it plays a significant role in an individual’s retirement goals. Living within their means now and setting aside a little income each month could mean the difference between striving or thriving in retirement. In addition to education on investing, be sure to also include financial guidance on paying down debt, minimizing overspending and avoiding other potential financial pitfalls.

Defined benefit pensions

Employer-sponsored pensions were once a major source of guaranteed retirement income for many employees. Traditional pension plans are desirable for their guaranteed income but are more commonly offered to government employees, with 86% having access to such plans. Meanwhile, only 15% of private-sector workers have access to employer-sponsored pensions.3

Plan sponsors can help breathe new life into pension plans by offering cash balance defined benefit plans for employees, which can be combined with 401(k) defined contribution plans if desired. Not only can cash balance defined benefit plans serve as an incentive for key employees, they may help organizations meet their business goals by potentially reducing tax expenses, maximizing benefits for owners and controlling overall plan costs.


At one time, a traditional savings account could provide a meager income based on interest rates. In recent years, however, interest rates on traditional bank accounts have struggled to break even when inflation is taken into account.

Savings accounts are desirable for their liquidity and quick access to funds, but most financial professionals agree that maintaining a large balance in such accounts could result in negative returns. Interest rates on other “safe” investment vehicles may reap greater rewards, such as certificates of deposit or money markets. Their earnings likely won’t be enough to fund a retirement that lasts for 20 or 30 years, however. 

That said, it’s still practical to encourage workers to maintain an emergency fund to cover unexpected expenses, such as major repairs or healthcare costs. Employees should also consider whether the establishment where their funds are kept is FDIC-insured up to $250,000.

Working in retirement

Just because someone retires from a lifelong career doesn’t mean they need to stop working. Side jobs and part-time employment are a helpful source of additional income for some retirees. Many are able to work flexible hours in jobs they enjoy without the pressures and demands of a full-time career. Even a few hours a week can make a difference and help extend the time between official retirement and claiming Social Security benefits, helping to bridge the gap.

When consulting with clients or employees, be sure they’ve considered all potential income streams as part of their retirement strategy. Combining income sources may be the best way to help ensure they maximize potential benefits while minimizing the risk of running out of money in retirement. 

1, Social Security Fact Sheet, accessed Aug 1, 2023
2, When to Start Receiving Retirement Benefits, January 2023
3, Retirement plans for workers in private industry and state and local government in 2022, Feb. 1, 2023