What Is a Good Monthly Retirement Income?

Retirement means leaving behind the security of a regular paycheck and instead relying on savings or other sources of income to pay the bills. That can be a scary proposition for some people.

Medium wide shot of senior woman cleaning up in kitchen after dinner with family

© (Getty Images)
Medium wide shot of senior woman cleaning up in kitchen after dinner with family

“I tell people, why don’t you do a trial run on it?” says Barbara A. Pietrangelo, a certified financial planner and board chair at Life Happens, a non-profit founded by insurance industry leaders. She suggests pre-retirees determine how much income they can expect in retirement and try to live on that amount prior to exiting the workforce.


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But knowing how much income to expect in retirement is different than knowing whether that is a good amount.

“Retirement is a dynamic phase of someone’s life,” says Rich Ramassini, a certified financial planner and chief sales and strategy officer for PNC Investments. An individual’s expenses can fluctuate depending on someone’s interests or health at any given time.

Working with a financial professional can be the best way to get personalized guidance on how much you’ll need in retirement, but for those early in the planning stages, seeing how much other retirees make and spend can be a helpful starting point.

How Much People Spend in Retirement

Conventional wisdom has long held that expenses go down in retirement as people no longer commute to a workplace or pay for employment-related expenses. As a result, an oft-stated rule of thumb suggests workers can base their retirement on a percentage of their current income.

“Seventy to 80% of pre-retirement income is good to shoot for,” says Ben Bakkum, an investing researcher with financial firm Betterment.

But he adds that there are other variables to consider, such as inflation, market downturns and changes in spending patterns. “Some people travel more after retirement,” he says.

In 2020, U.S. households led by someone age 65 or older spent an average of $45,270, according to data from the Bureau of Labor Statistics. However, many retirees spent less than that. The BLS reports 2020 spending for those age 65 and older broke down into the following percentages:

  • Less than $10,000 – 2.1%
  • $10,000-$19,999 – 18.2%
  • $20,000-$29,999 – 21.4%
  • $30,000-$39,999 – 18%
  • $40,000-$49,999 – 12.2%
  • $50,000-$74,999 – 15.9%
  • $75,000-$99,999 – 5.5%
  • $100,000 or more – 6.7%

Average Monthly Retirement Income

Once you know how much you plan to spend in retirement, you can home in on a savings goal that will generate that amount of money. “For every $50,000 of income you need, you need a million bucks,” says Chuck Czajka, founder of financial firm Macro Money Concepts in Stuart, Florida.

Many retirees fall far short of that amount though. According to data from the BLS, average incomes in 2021 after taxes were as follows for older households:

  • 65-74 years: $59,872 per year or $4,989 per month
  • 75 and older: $43,217 per year or $3,601 per month

For some people, Social Security benefits might comprise a substantial portion of this income. As of February 2023, the average monthly retirement benefit for Social Security was $1,782, according to the Social Security Administration.

Top Sources of Retirement Income

Retirement income can come from a variety of sources. A 2022 report from the Census Bureau, which was based on 2017 data, highlights the following income sources for those age 65 and older:

  • Social Security income
  • Pension and retirement account income
  • Earnings
  • Property income
  • Supplemental Security Income
  • Other income, including workers’ compensation, veterans benefits and other cash income sources

“Social Security is still a pretty significant contributor to people’s retirements,” Ramassini says.

In fact, Social Security payments account for more than half of total income among households headed by someone age 65 or older, the Census Bureau says. Earnings were the second-largest source of income at 19.3% while pensions and retirement account income made up 17.2% of total income.

How Retirement Income Is Changing

Recent decades have seen a sea change in how retirement is funded. “This is the first generation that is retiring and is solely responsible for themselves,” Czajka says.

In the past, workers who remained with an employer long enough could count on receiving a pension in retirement. This benefit typically provided guaranteed payments for the remainder of a retiree’s life.

More than 80% of full-time workers in large establishments were covered by pension plans in 1981, according to the BLS. By 1997, that percentage had fallen to about half, and only 15% of workers had access to these retirement plans in 2020.

For many retirees, Social Security has served the same role as a private pension, providing reliable monthly payments. But now, “There’s lots of uncertainty around Social Security,” Bakkum says.

Without Congressional action, the trust funds that supplement benefits are expected to run dry in about a decade. At that point, Social Security is only expected to be able to pay out 80% benefits owed.

How to Increase Retirement Income

Those who want to boost their retirement income have several options. These include continuing to work, delaying Social Security benefits or creating a guaranteed stream of income.

“For some people, honestly, a part-time job is not really a bad idea,” Pietrangelo says. It can provide income and social interaction, both of which can be vital for older Americans.

Working can also allow people to delay claiming their Social Security benefits. For every year a person waits to claim benefits past their full retirement age, they get an 8% boost in their benefits. However, this perk ends at age 70 so there is no reason to delay filing beyond that.

“A lot of retirees turn hobbies into businesses,” Czajka suggests as another way to generate income in retirement.

Those who want the security of regular payments can take a portion of their money and purchase an annuity. These financial products provide predictable payments for the life of the person insured by the annuity contract. A nice benefit of some newer annuities is that the balance can go to beneficiaries if someone passes away prematurely, Pietrangelo says.

While it is helpful to know what others make and spend in retirement, a good retirement income for you may be different. If you are unsure how much you’ll need, consult with a trusted professional to evaluate your situation and carefully weigh your options.

Copyright 2023 U.S. News & World Report

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