Income Sources Available to Retirees Beyond Social Security

A defined-benefit pension pays a monthly amount based on years of service and salary history, typically for life. These plans are more common among former government employees, educators, and union workers. Unlike investment accounts, the payout amount is generally fixed at retirement and does not depend on market performance.

Retirees with a pension should confirm whether survivor benefits are included, as these affect how much a spouse would receive if the pensioner dies first. Pension income is usually taxable at the federal level and may be taxable at the state level depending on where you live.

Traditional Individual Retirement Accounts (IRAs) and employer-sponsored 401(k) plans hold pre-tax contributions that grow tax-deferred until withdrawn. Distributions in retirement are taxed as ordinary income. The IRS requires account holders to begin taking Required Minimum Distributions (RMDs) — mandatory annual withdrawals calculated from account balances and life-expectancy tables — starting at age 73 under current law (SECURE 2.0 Act).

Missing an RMD deadline can trigger an excise tax, so understanding the rules matters. For a full breakdown, see our explainer on RMD rules retirees often misunderstand.

Roth accounts are funded with after-tax dollars, meaning qualified withdrawals in retirement are generally tax-free under IRS rules. Roth IRAs are not subject to RMDs during the account holder's lifetime, offering greater flexibility in managing taxable income year to year.

Because Roth distributions do not count as taxable income, drawing from a Roth account strategically can help retirees stay in a lower tax bracket or reduce the portion of Social Security benefits subject to federal income tax. Eligibility to contribute to a Roth IRA in pre-retirement phases out at higher income levels, so rules vary by situation.

An annuity is a contract with an insurance company that converts a lump sum into a stream of periodic payments, either immediately or at a future date. Immediate annuities begin paying within a year of purchase; deferred annuities accumulate value over time before payments start. Some annuities offer fixed payments; others are tied to market indexes or investment sub-accounts.

Annuities can provide guaranteed income that lasts a lifetime, which addresses the risk of outliving savings. However, they often carry fees, surrender charges, and limited liquidity. Our balanced overview of annuities in retirement covers what retirees should weigh before committing to one.

Many retirees supplement fixed income by working part-time, freelancing, or offering consulting services in their former field. Earned income in retirement has implications worth noting: it may be subject to Social Security payroll taxes and can affect the taxation of Social Security benefits if income exceeds certain thresholds before full retirement age.

Beyond finances, part-time work can provide structure, social connection, and purpose — factors research consistently links to well-being in later life. The nature and amount of work should be considered in the context of health, Medicare, and overall retirement goals.

Married retirees may be entitled to Social Security benefits based on a spouse's earnings record, sometimes up to 50% of the spouse's benefit amount. Surviving spouses may qualify for survivor benefits equal to up to 100% of the deceased worker's benefit, which can significantly affect long-term income planning for couples.

Coordination between spouses — including decisions about when each claims their own benefit — can have lasting effects on household income. For a detailed explanation of how these rules work, see our overview of spousal and survivor Social Security benefits.