We have already tackled the overview of retirement, its significance, and allocating money for it, the next we are about to discuss is looking for sources of money in creating a retirement nest egg.

Employment income appears to be the primary source of money for a retirement fund. However, there are other sources of funds an individual can access. The following are the usual sources of retirement savings.

Employment Income

Like what we have mentioned before, income from work is the primary source of money for making a retirement fund. As you progress through your working life, your annual income may be the biggest source of funds you will receive.

Jot down your after-tax annual income and subtract your yearly living expenses for mapping out your retirement plan. The amount left over is your discretionary savings that you have at your disposal. Depending on the result of your computation, you can save either a huge or small portion of your income toward your retirement. Make sure to use a budget and include all recurring expenditures. One way to ensure this is to consider the amount you plan as if it is regular expense. Include also in your retirement income computations if you will work during your retirement years. Regardless, determine the maximum amount of retirement income you can contribute to your retirement fund every year.

For American residents, the disposable income earmarked for retirement savings can be placed in an after-tax account in which earnings are added to your salary and taxed each year; or deposited in a retirement account such as a Traditional IRA or Roth IRA. The amount in an after-tax account won’t be taxed again during retirement. But the money in a Traditional IRA may be taxed at your regular income tax rate for the year you withdraw the amount.

Employer-Sponsored Retirement Plan

People have the option to participate or not in a retirement plan. If you decide not to, you have to find other income sources to finance your retirement account. But if you want to join in an employer plan, speak with your plan provider and get a estimate of the fund’s worth upon your retirement. Your plan provider must be able to give you an assessed value, in today’s dollars, of your retirement funds in terms of a monthly allowance.

Funds from the employment-sponsored plan can help shoulder your living expenses during your golden years. But most plans have rules about the age at which an employer can start receiving payments. Either you cannot withdraw money from the plan until age 65, or you may but with a penalty, which cuts the monthly payment you take.

Savings and Investments

Account all the savings and investments that you have. If you have accumulated a substantial investment portfolio, that might be enough to cover your retirement needs. But if you are about to start saving for retirement or started planning for it late, look for greater income that will compensate for your lack of retirement savings.

In case you have current savings and investments, include only the amount you expect to have left over by the time you have retired. Exclude any portions you are planning to leave for your children or spend on other assets because the funds won’t be sufficient to cover your cost of living.

Social Security

Benefits from your Social Security can provide a small amount of retirement income. But you can estimate your retirement benefits, in today’s dollars, by using its online calculator found on the SSA website.

It is not advisable to include social security benefits in your retirement computations since the overall projected amount may not be available once you retire. But you can include 50% of its value in the equation.

Anyhow, know your estimated social security benefits and add this to the possible source of retirement income. Remember, you won’t be able to use the money from this. But it can help in sustaining your retirement expenses and cut the size of nest egg you will need.

Other Sources

Other sources of retirement income may include an inheritance from your parents before hitting the golden years such as real estate, which you may or may not sell before retiring. Whatever additional fund sources you have, include it in your projections only if you are certain about it. Other examples of unexpected cash inflows include bonuses, gifts, raises, or lottery winnings. Should you receive additional income, you can include these in your retirement fund.