Once you have calculated this amount, you should determine where that income will come from. Traditionally, there are four sources of retirement income : Social Security benefits, pension benefits, savings, and work income.

How much can you expect Social Security benefits to contribute? One study found that the median replacement rate is 37% for men and 52% for women. Since men have higher earnings levels than women and the system is progressive, their replacement rates are lower. The overall replacement rate is 42%, but that number varies significantly depending on income level. Individuals with the lowest fifth of earnings had a 72% replacement rate, while those with the highest fifth of earnings had a 31% replacement rate. When couples are considered, the median replacement rate is 56% when one spouse did not work and 42% when both spouses worked (Source: Center for Retirement Research, November 2005).

To find your personal replacement rate, check your estimated benefits in your annual Social Security Statement, which details three different benefit amounts — those at age 62, at full retirement age for Social Security purposes, and at age 70. Your annual benefits divided by your annual income equals your replacement rate. You might want to calculate the replacement rate for each of the three different benefit amounts. Then consider other sources of retirement income, including pension benefits and savings, to find out how close you are to the amount you need for retirement.

If your replacement rate is under what you need, consider delaying your Social Security benefits. Most people start benefits before age 65, with 74% of men and 78% of women starting benefits before age 65 in 2003 (Source: Social Security Administration, 2005). Approximately 59% of women and 53% of men started benefits at age 62, even though delaying benefits permanently increases Social Security benefits.

Married couples should consider this option carefully. Since women are often younger and live longer than their husbands, they will receive benefits for a longer period of time, with the amount of those benefits often dependent on the age their husbands start benefits. When the husband is alive, the wife is entitled to the larger of 100% of her benefit based on her earnings or 50% of the husband’s benefit at full retirement age. However, if the husband elects benefits before full retirement age, the wife’s benefit will be reduced by a higher percentage than his benefits were reduced. After the husband’s death, the wife receives 100% of the husband’s benefit if she is over full retirement age. If not, the wife receives between 71.5% and 100% of the husband’s benefit. Thus, the larger the husband’s benefit, the larger the wife’s benefit will be after his death.

Another study conducted by the Center for Retirement Research (October 2005) recommends that the husband delay Social Security benefits until at least age 66. For most couples, it was recommended that the husband start benefits at age 69 and the wife start benefits at age 62. When the couple was close in age and earnings, benefits for the husband should start between ages 66 and 68.