Where will your retirement income come from?

You're likely to have two main types of retirement income: regular and variable.

Regular sources of income pay a set amount. Some common sources of regular income are Social Security, pensions, and fixed annuities. With these, an outside entity such as the federal government, your employer, or an insurance company promises a specified amount of retirement income, typically for as long as you live. The outside entity bears the risk and responsibility of providing the steady stream of promised income.

Variable sources of retirement income are essentially your savings, including employer retirement plan accounts, IRAs, lump-sum pension distributions, and taxable savings accounts. You, as the owner of these accounts, are responsible for managing your money and deciding how much to withdraw each year. No outside entity is guaranteeing that your accounts will provide lifelong income.

Identify all of your retirement savings

A retiree's largest source of variable income is typically their accumulated retirement savings. If you've worked for multiple employers, you may have retirement savings scattered across multiple plan accounts. Make sure you don't miss any when listing your retirement income resources.

It's not impossible to lose track of a retirement account. Maybe you saved a little money in an old employer's plan 30 years ago. After three decades of possible returns, there may be more money there than you expect. You may want to contact former employers to determine whether you have old accounts or pension benefits available.

You may also have an IRA, which has grown–like your employer's plan account–tax-deferred. Finally, you may have retirement savings in taxable accounts—meaning that you've paid taxes every year on their earnings without any deferral from the IRS. You may still owe capital gains taxes when you withdraw from a taxable investment account.

Making the most of Social Security

Social Security is the most common source of income among Americans age 65 and older. Benefits are guaranteed by the government, so market fluctuations will not change payment amounts. What's more, benefits increase with inflation, so your Social Security payments will maintain their purchasing power.

One way to increase your Social Security benefits is to postpone filing for benefits. Workers can file for Social Security retirement benefits as early as age 62. But if you wait until your full retirement age (from age 65 to 67, depending on what year you were born), your Social Security benefits will be 20% to 30% higher for life.

Similarly, if you continue to postpone benefits after your full retirement age, your benefits will rise by 8% for each year you delay up until age 70. If your full retirement age is 66 and you wait until age 70 to begin receiving benefits, your monthly payments will be 32% higher for life. Payments are not increased if you delay taking benefits past age 70.

You can estimate your Social Security retirement benefits at various ages using the Social Security Estimator at ssa.gov.*

Action steps

  • Identify your retirement savings accounts and their balances.
  • Estimate how much income you can draw from each source using our worksheet.
  • Decide when to start your Social Security benefits.

*When you access this website, you will be leaving our site. Vanguard is not responsible for the accuracy of information on third-party sites.

When taking withdrawals from a tax-deferred plan or an IRA before age 59½, you will have to pay ordinary income tax plus a 10% federal penalty tax.