fbpx

Average Retirement Income

Share to Linkedin Share to Twitter Share to Facebook Share to Print More
Benzinga Money is a reader-supported publication. We may earn a commission when you click on links in this article. Learn more.

More than half of Americans have no retirement savings at all, and those who do often fall short of savings targets by age and income.

Take a look at how you compare to the average American household to help figure out how much of your income you’ll have to supplement in order to have a healthy monthly retirement income.

Pricing
$1,200 to $6,000/year, depending on acct type
Account Minimum
$0
Pricing
Depends on Advisor
Account Minimum
$0
Get started securely through SmartAsset’s website
Best For
New bitcoin investors
Overall Rating
get started securely through bitcoinIRA’s website
Best For
New bitcoin investors
N/A
1 Minute Review

Bitcoin IRA provides a solution for those looking to take their retirement account outside the traditional market. It partners with BitGo Trust to facilitate the setup of an individual retirement account (IRA) and a digital wallet to hold and trade cryptocurrency. Bitcoin IRA offers a proprietary always-on, self-directed trading platform that empowers you to invest in your future. In addition to digital currency, you can also use Bitcoin IRA to purchase gold, another popular alternative asset for savvy investors.

Best For
  • New Bitcoin investors who have a handle on their overall financial strategy
  • People who have room in their budget for a $100 monthly contribution for an easy set-and-forget savings and investment strategy
  • Investors who can tolerate high levels of risk associated with trading crypto and who are able to hold precious metals investments for at least 10 years
Pros
  • Great rollover options
  • Investments stored offline for greater security
  • Easily create an account and digital wallet in under 3 minutes
  • 24/7 trading platform
Cons
  • Due to U.S law, cannot transfer existing cryptocurrency holdings into a Bitcoin retirement account
  • No financial advisory or planning services
Best For
Beginner cryptocurrency investors
Overall Rating
get started securely through iTrustCapital’s website
Best For
Beginner cryptocurrency investors
N/A
1 Minute Review

iTrustCapital is a self-directed IRA provider that gives you the opportunity to invest in cryptocurrencies, gold and silver through your retirement account. iTrustCapital focuses on providing investors with a straightforward and easy-to-understand platform, which can be a major asset if you’ve never bought or sold alternative investments in the past. 

When you reach retirement age, iTrustCapital allows you to choose whether you’d like to take your disbursements in cash or in the assets you’ve invested in. Though the platform does offer a limited range of cryptocurrencies when compared to brokers like Coinbase, its simple structure and unique IRA offerings make iTrustCapital a great place to invest.

Best For
  • Investors who want to add gold, silver or cryptocurrencies to their IRA
  • Those who are interested in taking a long-term approach to cryptocurrency or metal investing
  • Beginner cryptocurrency investors
Pros
  • Straightforward platform allows you to buy and sell assets in a few minutes
  • Orders clear within 5 minutes
  • 24/7 order placements and portfolio monitoring services
  • Both live chat and phone customer service service available
Cons
  • Limited number of cryptocurrencies to buy and sell
  • No mobile app currently available
Pricing
There are no fees to open or maintain your account. Other account fees, fund expenses, and brokerage commissions may apply.
Account Minimum
$0
Get started securely through Charles Schwab’s website

How Much Income Do Retirees Have? 

As a general rule, you’ll need about 70% to 80% of your preretirement income to maintain a similar standard of living in retirement and cover your expenses. This amount will generally cover the cost of healthcare, housing and other necessary expenses while also allowing a little freedom as well.

Your income in retirement will come from 3 sources: Social Security benefits, retirement savings and your pension plan.

1. Social Security Benefits

According to the Social Security Administration (SSA), more than 85% of people 65 and older receive Social Security benefits. Of that, 40% depend on Social Security for the majority of their retirement income.

However, Social Security was never meant to be a primary source of retirement income; it is supposed to be supplemental. Check out our table that breaks down the average retirement income from Social Security.

 SingleMarried
2020 average monthly income from Social Security$1,503Depends on retirement age and lifetime earnings of both spouses. If both spouses collect the average monthly income: $3,006
2020 average annual income from Social Security$18,036 If both spouses collect the average monthly income: $36,072
50% or more of income comes from Social Security70%50%

Use the SSA’s Social Security Retirement Estimator to project how much of your retirement income will come from Social Security.

To be eligible for Social Security Benefits, you need to have worked and paid into the system for a minimum of 40 quarters or 10 years. 

How to Calculate Your Social Security Income

Your Social Security income is calculated using 2 factors:

  • Age. When you chose to retire affects how much you receive in Social Security benefits. You can collect Social Security as early as age 62 or as late as age 70. However, the earlier you start collecting, the less you receive in benefits. According to the SSA website, if you turn 62 in 2020 and start collecting your Social Security benefits, your benefits would be about 28.3% lower than if you waited until full retirement age (66 years and 8 months).
  • Earnings. The SSA averages your monthly earnings over the 35 years that you earned the most. Higher lifetime earnings translates into higher Social Security benefits. If you’re married, then the amount each spouse receives depends on their work history. 

 For 2020, the maximum monthly benefit is:

  • $3,790 if you file at age 70
  • $3,011 if you file at full retirement age (currently 66)
  • $2,265 if you file at age 62

If Social Security is your only source of retirement income, then you probably won’t pay income taxes in retirement. If you have additional sources of income, then up to 85% of your Social Security income may be subject to taxes. 

2. Retirement Savings

Most retirees don’t have pension plans and Social Security income isn’t enough to maintain a pre-retirement standard of living. So, for most retirees, the primary source of income comes from retirement accounts such as 401(k)s and Individual Retirement Accounts (IRAs).

 401(k)

A 401(k) is a defined contribution plan. A defined contribution plan is an employer-sponsored retirement savings plan that allows employees to save and invest some of their paycheck before taxes are taken out.

Employers can either match employees’ contributions or contribute partially. Contributions are invested and the retirement benefits an employee has access to for income reflects investment gains or losses.

Unlike a pension plan, a defined contribution plan like a 401(k) doesn’t guarantee payment in retirement. There also are limits to how much you can contribute to a 401(k).

In 2020, 401(k) contribution limits rose to $19,500 per year.

IRA

There are 2 types of IRAs: simple IRAs and traditional IRAs. Both are tax-deferred retirement plans. You contribute pre-tax money, allowing for tax-deferred growth, then pay taxes years later when you withdraw, ideally at a lower tax rate than you are currently paying. Like a 401(k), there are annual contribution limits to IRA accounts.

Traditional IRAs are set up by individuals and only account owners can make contributions. Traditional IRAs can be used in combination with or to supplement an employer-sponsored 401(k) or simple IRA account. Traditional IRA contributions are lower than simple IRA contributions: $6,000 per year in 2020 ($7,000 per year if you are over 50).

Simple IRAs are an employer-provided retirement account designed for employees without a traditional 401(k). Both employers and employees can both make contributions to simple IRA accounts. In 2020, simple IRA contributions increased to $13,500 annually ($16,500 if you are over 50). 

3. Pension Plans

A pension is a defined-benefit plan. A defined-benefit plan is a retirement plan funded by your employer, though in some cases employees may be required to contribute to the plan as well.

Typically, a pension amount is determined by factors such as salary, length of service, and years of enrollment. Pension plans guarantee retirees a certain income each month regardless of how their investments performed.

Pension plans are becoming a less common source of retirement income. As of 2019, only about 30% of today’s retirees receive income from a pension plan. The reason is simple: most employers don’t offer pension plans anymore. Annual pension benefits range from about $9,000 per year for a private pension to about $22,000 per year for federal government pensions.

How Much Income Do Average Savings Produce?

Typically, you can plan to withdraw around 4% of your retirement savings each year. If you have $100,000 in retirement savings and assuming that you have a 4% annual return, that would provide around $4,000 in retirement income your 1st year of retirement, or about $333 per month.

How Much Savings Do Retirees Have? 

Despite increases to retirement savings contributions, most households do not have sufficient retirement savings. According to the National Institute on Retirement Security, based on 401(k) and IRA account balances, 92% of working households fall short of retirement savings targets for their age and income. 

401(k) accounts are the most common retirement savings account that the majority of retirees rely on for retirement income. Below is a table breaking down the average 401(k) account balance by age group in 2019.

Age Group2019 Average 401(k) Balance
20-29$11,800
30-39$42,400
40-49$102,700
50-59$174,100
60-69$195,500

How to Increase Your Retirement Income and Savings

There are several actions you can take now to increase your savings and income when you retire.

Increase Your Social Security Income

You can boost your retirement income with a focus on securing higher Social Security benefits. Here are a few suggestions:

  • Postpone collecting benefits. The longer you wait, the more you will collect. If you wait until age 70, you can collect almost $300 extra each month. However, there is no benefit for waiting after 70 to collect benefits.
  • Higher earning spouse defers. If you are married, the higher earning spouse should defer the start of benefits for as long as possible so that you can maximize your monthly Social Security benefits as a couple.

Increase Your Retirement Savings Income

  • Maximize your account savings contributions. Take advantage of pretax contributions and max out your account contributions.
  • Have multiple retirement savings accounts. Maximize your benefits by having multiple pretax and tax-free retirement savings accounts.
  • Maximize catch up contributions. If you’re over 50, take advantage of the extra contributions you can add to your retirement savings each year.
  • Eliminate or reduce unnecessary expenses. Use a spreadsheet or app to help you keep track of your expenses and find ways to eliminate or reduce discretionary expenses.

Are You Ready for Retirement? 

Retiring is not as simple as packing up your stuff and walking off into the sunset of your later years. It takes serious planning and foresight. You need to consider your anticipated expenses, anticipated income and anticipated length of retirement to know how much to budget and save for.

Talk to a financial advisor about ways that you can maximize your retirement savings leading up until your retirement as well as ways to maximize your income during retirement so that you feel secure in your post-working years.

Frequently Asked Questions

How much money do I need to retire?

1
How much money do I need to retire?
asked
1

You’re probably looking for a specific dollar amount like $1 million, but it’s not that simple. Your retirement goals and standard of living drive the amount of money you need to retire.

How you hold that money and draw that money matters as well. You can retire without working with a financial advisor, but it’s not recommended. Meet with an advisor to discuss your retirement plans and list the specific dollar amount you need to make it all happen.

answered

How can I prepare to live on a fixed income?

1
How can I prepare to live on a fixed income?
asked
1

There are many ways you can prep for the change from a steady income to a fixed budget. Try implementing a few strategies now to see what works for you:

  • Set up automatic payments. Add funds to your savings automatically so you’re never tempted to spend it.
  • Cut down on extra expenses. Get rid of cable, ditch your coffee habit or walk more instead of driving. Small daily expenses can add up quickly, and the savings after cutting them can add up quickly as well.
  • Get a gig. Some people retire but don’t quit working. Do some freelancing, online work or get a part-time job to tally up the cash. You might find a new way to busy yourself in retirement and save some extra money in the process.

answered

What is the average income for retirees?

1
What is the average income for retirees?
asked
1

The median income is $56,632 per year.

answered

What countries can I retire to and live off of $2,000 per month?

1
What countries can I retire to and live off of $2,000 per month?
asked
1

You can live off $2,000 per month in Costa Rica, Mexico and Portugal.

answered