What are the four primary sources of income that retirees generally rely on?

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Prepare for the Advanced Diploma of Financial Planning Exam. Study with flashcards and multiple-choice questions, each question has hints and explanations. Get ready for your exam!

Retirees typically rely on four primary sources of income to support themselves during retirement, which include Social Security, private pension plans, personal savings, and some form of employment.

Social Security is a government program that provides financial benefits based on an individual’s work history, ensuring a baseline income for retirees. Private pension plans are employer-sponsored plans that provide retirees with steady income based on their years of service and salary, offering additional financial security. Personal savings encompass various forms of savings (such as 401(k) accounts, IRAs, and general savings accounts), providing a crucial source of funds for retirees to draw from during their non-working years. While many retirees may not wish to remain in the workforce, some do choose to engage in part-time work or other forms of employment to supplement their income and maintain social connections.

The other options provide sources that can contribute to retirement income but do not encompass the four mainstays as clearly and comprehensively as the selected choice. For instance, while real estate can provide income through rental yields, and stocks or bonds can yield dividends or interest, they are not universally relied upon by every retiree. Similarly, gifts and inheritance can be unpredictable and are not guaranteed sources of income like Social Security or pensions.

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