Expanding your Retirement Income Horizons

Working people tend to get the majority of their income from a single job, but retirees often have several income streams. Setting up multiple sources of retirement income gives you flexibility in retirement, especially if one of your expected income sources doesn't work out. To give you an idea of what could make up your retirement paycheck, here are a dozen ways to pay for retirement:

Social Security. The majority of retirees (86 percent) receive payments from Social Security. Most seniors (65 percent) collect at least half their income from Social Security. And more than a third of retirees rely on Social Security for 90 percent or more of their income, according to Social Security Administration data. The average monthly payment was $1,366 in April 2017. How long you work, your annual earnings, your marital status and the age you sign up all play a role in how much you will receive from Social Security.

Medicare. Medicare premiums are typically deducted from Social Security checks. The various parts of Medicare help pay for hospital care, doctor's visits, prescription medications and a variety of tests and procedures. Some types of preventive care are covered with no additional out-of-pocket costs, while other services trigger copays or coinsurance in addition to the premium costs.

Pensions. While many young employees aren't eligible to join traditional pension plans, some older people continue to receive regular pension payments. Pension income is particularly common among people who worked in the public sector, union members and employees of large companies.

Retirement account withdrawals. Only about a quarter of retirees say withdrawals from 401(k)s, IRAs and similar types of accounts are a major source of retirement income, but half of current workers are expecting to rely on retirement account distributions to pay for retirement, a Gallup survey of 1,019 adults found. Remember, distributions are treated as taxable income, so the longer you can delay those withdrawals, the more you are going to have in your pocket. If you can delay withdrawals until the required age, then those earnings can continue to grow tax-deferred until you have to start taking them out.

Home equity. Retirees who are willing to sell their current home and downsize to a less expensive house or part of the country may be able to quickly and significantly boost their retirement savings. Seniors who want to stay in their current home may be able to tap their home equity using a reverse mortgage.

Part-time work. The majority of working adults (74 percent) say they want to continue to work at least part time after they retire for financial as well as social reasons, the Gallup survey found. But only a quarter of current retirees say they receive income from a part-time job.

Investment gains. Individual stocks and stock mutual fund investments held in taxable brokerage accounts that increase in value can be used to pay for retirement. If you hold a stock for more than a year before you sell it, you will pay the preferential long-term capital gains tax rate of no more than 15 or 20 percent, which for many people is lower than the regular income tax rate applied to traditional retirement account withdrawals.

Personal cash savings. After decades of accumulating a nest egg, it's finally time to spend that money. The money in your savings account or certificate of deposit can be used to cope with emergencies or cover your monthly bills so that you can better time your withdrawals from retirement and investment accounts.

Annuities. If you're willing to hand over a chunk of your retirement savings to an insurance company, you can purchase an immediate annuity, which will provide you with regular payments for the rest of your life, no matter how long you live. An annuity protects you from outliving your savings or losing money in the stock market. However, some annuities charge steep fees, and you probably won't be able to leave the money in the annuity to heirs, even if you die shortly after purchasing one.

Rent. Some retirees invest in rental properties and use the income to pay for retirement. Seniors who are willing to share their living space might be able to rent out a room in their home or space in their garage. However, maintaining a property and dealing with tenants could easily become a full-time job, and outsourcing the work to a management company could cut into your profits.

Royalties. If you hold a patent or are an author or composer, you could receive royalty payments throughout retirement. In some cases you might be able to do some publicity or distribution work to bring in extra retirement income.

An inheritance. When loved ones pass away, you might inherit some of the wealth they left behind. But not all promised inheritances end up materializing. To be prudent, plan on getting less than the expected amount by 25 to 33 percent, or factor in getting the inheritance three to five years after the life expectancy of your parents in case they end up living longer than anticipated and pushing out the date for when you would receive the inheritance.