Retirement plans

Retirement plans

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Where will your retirement income come from?
Make withdrawals without running out of money
How to handle a retirement income shortfall
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Where will your retirement income come from?

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

Regular sources 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 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

Your largest source of variable income may be your retirement savings. If you've had many employers, you may have several plan accounts. So make sure you don't miss any when you list your retirement income resources.

It’s possible that you may have lost track of a retirement account. Maybe you saved a little money in an old employer's plan 30 years ago. After 30 years of possible returns, you may have more money than you’d expect in that account. You may want to contact former employers to see 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. Keep in mind that you may still owe capital gains taxes when you withdraw from your account.

Making the most of Social Security

Most Americans age 65 and older use Social Security as income. The government guarantees your benefits, so your payments will stay the same even if the market fluctuates. What's more, payments increase with inflation, so your Social Security payments will keep their purchasing power.

The longer you wait to start Social Security, the higher your payment will be. You can start Social Security 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 wait, your benefits will rise by 8% for each year up until age 70. If your full retirement age is 66 and you wait until age 70 to start Social Security, your monthly payments will be 32% higher for life. Payments don’t increase past age 70.

You can estimate your Social Security retirement benefits 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.