Common Sources of Income For Seniors

Common Sources Of Senior Income

Most older adults have meager retirement incomes. Hence, looking for another stream of income is very important for seniors to afford to sustain their needs.

According to a 2020 NIRS study, 40% of Americans rely on Social Security as their sole source of income during their retirement. A worker’s average annual Social Security benefit is nearly $20,000, hardly enough money for most retirees to subsist on.

This article will discuss the main income sources for retirees, how much they typically receive from each and other ways they can earn a senior income:

Common Sources Of Retirement Income

Social Security

According to the SSA, Social Security is the most frequently used retirement benefit, with 86 percent of beneficiaries 65 and older getting monthly benefits. To receive larger monthly benefits, some people wait until they are 65 years old to file. The Social Security Administration estimates that 97 percent of older adults (aged 60 to 89) either receive Social Security or will receive it.

According to the Social Security Administration, the average retiree benefit will increase by $146 per month, to $1,827 in 2023 from $1,681 in 2022. 

The main source of retirement income for the majority of Americans is Social Security. Sixty-five percent of seniors rely on Social Security for half or more of their income. And 36% of those 65 and older receive at least 90% of their monthly income through Social Security payments.

Defined Benefit Plans

You should know your expected pension income before retiring if you have a defined benefit pension. This income is normally determined by your length of employment, salary, and age when you quit working. As you get closer to retirement, you should inquire about your employer’s pension eligibility with the human resources department. Additionally, the office must continue to be a useful asset once you retire.

Defined Contribution Plans

If you have a defined contribution plan, your company might contribute, let you contribute, or occasionally both. However, unlike a defined benefit pension, your employer doesn’t guarantee that you’ll have money coming in after you stop working. Instead, that sum is determined by the amount invested, the location of the investment, and the length of participation in the plan.

The most well-known defined contribution plans are sponsored by employers and include 401(k), 403(b), and 457 retirement plans. Simplified Employee Pension (SEP) IRAs, SIMPLE 401(k)s, and SIMPLE IRAs are additional schemes that often serve small enterprises. 

Using these schemes, you can contribute a portion of your current salary to a retirement plan. Most of the time, you also choose how your money is invested by selecting options provided by the plan.

Other Sources Of Income For Seniors


The retirement years are increasing, including working after retirement. In 2020, 10.6 million people 65 and older were in the workforce, according to the Bureau of Labor Statistics (BLS). The BLS further stated that those numbers are expected to grow by 2030, when baby boomers (born between 1946 and 1964) will turn at least 65 years old. 

Home Equity

Another potential source of retirement income is your house. Two of the most popular ways to use your property to create retirement income if you own it outright or have a sizable amount of home equity are to sell it or take out a reverse mortgage.

If you decide to sell your house, your goal should be to use some of the sale money to pay for your retirement. Naturally, this assumes that your home’s worth has increased since you first purchased it. You can sell your property and enjoy tax-free gains of up to $250,000 if you’re single and $500,000 if you’re married, according to the Taxpayer Relief Act of 1997.

Reverse Mortgages

A reverse mortgage may also provide retirement income if you are at least 62 and have a fixed monthly income. They let you turn your home equity into a loan and are formally known as home equity conversion mortgages. The revenues might be received as a one-time payment, a series of regular installments, or a line of credit. 

Required to the fact that the money you receive is a loan and not income, a reverse mortgage has the tempting advantage that no income tax is due on it.

Reverse mortgages are challenging, though, and undoubtedly aren’t for everyone. This is because after you obtain a reverse mortgage, your debt to the lender increases with each payment you receive. When you pass away or vacate the property, this obligation must be paid back, usually by selling the property.


Another way for seniors to make money is through investments made after retirement. They invest a portion of their income to generate consistent returns or long-term portfolio growth.

Some of these investments include;

Immediate Annuities

Turning a lump sum into an ongoing, cannot-out-live income stream by purchasing an instant annuity is simple. Because the income stream begins immediately, is predictable, and is unaffected by dropping stock prices or lowering interest rates, retirees frequently use the money they built up throughout their working years to buy an immediate annuity contract.

An immediate annuity buyer understands that the income payment will never increase, implying that it will lose value over time due to inflation, in return for the cash flow and security. The bigger worry for most buyers is that you cannot alter your mind after purchasing an immediate annuity. Your principal is irrevocably locked in, and the insurance company retains the remaining balance in your account after your death.

Annuities are intricate products that can take many different shapes. Do your research before rushing out to get one.


Bonds are a form of debt. Therefore, purchasing a bond indicates that someone owes you money and will likely pay you interest. The safest bonds, such as those issued by the federal government, government agencies, and financially solid firms, can be a dependable source of retirement income when combined into a properly diversified portfolio. Building a laddered portfolio of bonds with varying maturities is one wise way to invest in bonds.

Dividend-Paying Stocks

Stocks, as opposed to bonds, reflect ownership in a company, and as an owner, you might get dividend payments regularly, once every three months. Typically, dividends are distributed to shareholders in the form of cash payments. However, not all businesses pay dividends, and if a business experiences financial difficulties, dividend payments may be suspended. To get a dividend, the retiree must own the stock; as a result, they are exposed to market risk. In other words, stock prices can fall, eliminating any dividend profits.

For this reason, retirees who purchase stocks for income should restrict their exposure to this tactic and stay with big, dependable businesses with a track record of delivering dividends.

Life Insurance

Although life insurance isn’t intended to be an investment, it can be a much-needed extra source of income for retirees who discover that they are occasionally short on funds. A whole life or universal life policy that builds cash value over time is the safest choice for the job. The cash reserves are available to policyholders through loans or direct withdrawals.

The caveat is that withdrawals and loans will diminish the policy’s death benefit by an equal amount, and if you cannot repay a loan, it will be paid back from the death benefit to your heirs.

Real Estate Investment Trusts (REITs)

Consider investing in equity REITs, which acquire, sell, and manage commercial properties like malls and apartment buildings, if you appreciate real estate but want to be something other than a landlord or mortgage holder.

Direct purchases of REIT shares can be made on stock exchanges, while indirect purchases can be made through mutual funds that hold a variety of securities. REITs regularly pay high monthly or quarterly dividends.

Savings Accounts and CDs

According to the Federal Deposit Insurance Corporation, FDIC-insured bank accounts and certificates of deposit are the safest and most reliable sources of income available (CD).

If CDs and savings accounts pay 2% or less, this technique will provide little money, but it may be a good choice when interest rates climb to more desirable levels.


Retirement income may come from various sources for many people, but it requires forethought. When it comes time to withdraw your money, choose the finest payout alternatives after careful planning and investing.

To learn how to stretch your money during your golden years, check out this guide on Making The Most Out Of Your Retirement Money.