Social Security, savings, or pensions? Top 3 retirement incomes explained — are you using the right one?

Top retirement income streams: For many Americans, saving for retirement is no longer just about getting by, it's about achieving financial security. Bank of America’s 2025 Workplace Benefits Report found that workers are increasingly focused on thriving in retirement and expect to rely on multiple income stream, as per a report.

With options ranging from employer-sponsored plans to Social Security and personal savings, experts weigh in on which income streams workers expect to depend on most and where potential risks may lie, as per a GOBankingRates report.

Employer-Sponsored Plans Top Retirement Income Sources

Employer-sponsored retirement plans such as 401(k)s and 403(b)s are the most commonly expected source of retirement income. Bank of America found that 85% of respondents say these accounts will be their top income source after they stop working.


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Why 401(k) and 403(b) Accounts Dominate Retirement Planning

Doug Carey, a chartered financial analyst and founder of WealthTrace, said the finding is not surprising. He explained that, “Over the past 40 years, many tax-deferred retirement plans have skyrocketed due to the strong performance of the U.S. stock market,” adding, “Using the returns of the S&P 500, if a person contributed $10,000 a year to a 401(k) plan over 40 years and was invested 80% in stocks, she would have nearly $3.5 million,” as quoted by GOBankingRates report.

Tax Risks of Relying Heavily on Tax-Deferred Accounts

That reliance, however, comes with drawbacks. Linda Jensen, principal owner of Heart Financial Group, warned that “When the majority of a retiree’s income is coming from tax-deferred accounts, taxes become one of their largest and most unpredictable retirement expenses,” adding, “It also means many retirees are entering retirement with limited tax flexibility and heavy exposure to future required minimum distributions,” as quoted by GOBankingRates report.

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Social Security Still a Key Pillar but Confidence Is Fading

Social Security is the second most common expected income source, with 75% of respondents planning to rely on it in retirement. Workers who expect to claim benefits say they plan to do so at an average age of 66, even though only about one-third say they understand what their benefits will actually be.

Confidence in Social Security is weakening. As of May 2025, only 45% of employees say they still plan to rely on it, while two in three worry that benefits may not be available by the time they retire. Forty percent say they are no longer confident in Social Security as a future income source.

Carey highlighted that many retirees depend on Social Security more than they should. He said that, “In fact, in 2023, 27% of all people on Social Security had Social Security as their only source of income,” adding, “This is a major problem if benefits are cut, and they are scheduled to decline by nearly 25% in 2033,” as quoted by GOBankingRates report.

He also pointed out that “Social Security taxation is not indexed to inflation. So more and more people are paying taxes on their Social Security checks,” adding that, “This can be a serious issue for those who assume there will be no taxes on their benefits,” as quoted in the report.

Cash Savings Rank Third as a Retirement Income Source

Checking and savings accounts ranked third, with 53% of respondents expecting to use them for retirement income. Jensen said, “Cash should protect you from market volatility, not from retirement itself. It works well for 12 to 24 months of income and emergencies, but not as a long-term growth solution,” but warned that, “Too much cash exposure increases inflation risk and longevity risk,” as quoted by GOBankingRates.

When Using Cash in Retirement Can Make Sense

However, Carey pointed out that there are situations where using cash can make sense, such as “It could be wise to use cash if an investor has a lot of capital gains in other investments. It can also be a good idea to use cash if this person is waiting until he is in a lower tax bracket before using capital gains or withdrawing from a retirement account and triggering income taxes on the withdrawal,” as quoted by GOBankingRates.

FAQs

What is the top source of retirement income for most workers?
Employer-sponsored retirement plans like 401(k)s and 403(b)s are the most common, cited by 85% of respondents.

Why are 401(k) plans so popular for retirement?
Strong long-term stock market performance has helped tax-deferred plans grow significantly over time.