Start a retirement plan with a spending plan

According to Gallup, only 29 percent of retirees say a 401(k) or an IRA is a major source of their income. Most – 58 percent – say Social Security is a major source. And 34 percent said pensions are a major source of retirement income.

That Gallup survey found the actual sources of retirement income varied quite a bit from the expectations retirees had while they were still working. Half had thought retirement savings would be most important, only 35 percent thought it would be Social Security, and 22 percent thought it would be a work-sponsored pension.

Where retirees get their income depends largely on where they worked. Pension plans are much less common in the private sector than they were a generation ago, while employer-sponsored savings plans like 401(k)s and IRAs have become more common.

How much retirees can rely on 401(k) and IRA investments depends on how much they set aside. One common gauge is the so-called 4 percent rule, where a retiree can withdraw 4 percent of their savings every year for income.

If you’re planning ahead and can estimate how much money you’ll need every year in retirement, a quick bit of math will tell you how much you’ll need in savings of one kind or another. Pulling out $40,000 every year in retirement would require a nest egg of $1 million, for example.

Social Security is an important source of income, whether it’s a retiree’s main income or  supplemental. It can also be a political football, a popular subject of both political and financial debate at the federal level. The average payment for retired workers in that program for 2025 is $1,967 per month.

As mentioned, not everyone in the private sector has a pension income available for retirement. And many public-sector employees have pensions but aren’t eligible for Social Security.

Pensions, too, can be subjects of political debate. Over the last few years, state officials across the nation have imposed, or tried to impose, non-financial constraints on pension investments and public finance decisions. That puts public employees on a political roller-coaster, wondering if financial responsibilities are taking a back seat to the cultural and political desires of elected officials.

Fidelity, a large operator of workplace retirement plans, says Americans between 60 and 70 years of age have a median balance of less than $70,000 in employer-sponsored 401(k) accounts. If you’re keeping score, 4 percent of $70,000 is $2,800; that raises the stakes for those depending on pensions and Social Security.

Just about every investment adviser has general information to get you started. Just Google “saving for retirement spending,” and jump in. Retirement advice often goes back to a fundamental saying: The earlier you start, the better off you’ll be when it’s time to retire.