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Saving for retirement is often overwhelming, especially when you need to prepare for potentially high costs of living in your later years. Reasonable financial goals might feel out of reach, and it’s difficult to know where to start or how much to save. Luckily, understanding what you can expect and knowing how to proactively optimize your retirement finances go a long way.
Learn what the average retirement income is in the U.S. and how to plan for the most successful financial future.
According to the Administration for Community Living's 2023 Profile of Older Americans, the median income for individuals aged 65 and older in 2022 was $29,740. Households led by individuals in this age group had a median income of $73,100.
When broken down by gender, men aged 65 and older had a median income of $37,430, while women had a median income of $24,630.
These figures highlight the importance of early retirement planning and diversifying income sources to ensure financial stability in later years.
In 2022, the primary income sources for individuals aged 65 and older were:
These statistics underscore the reliance on Social Security and the significance of personal savings and investments in supporting financial well-being during retirement.
A common metric is monthly retirement income that equals about 80% of your earnings before retiring. So if you earned $5,000 monthly, you should aim for $4,000 in monthly retirement income. The ideal monthly retirement income for couples depends on your personal preferences, retirement goals, and achievements.
A solid retirement plan draws from multiple income sources. Most retirees can’t rely on Social Security alone, which makes building additional income streams through annuities, savings accounts, and retirement plans a priority. Your long-term financial security can improve when you delay Social Security benefits and maximize your retirement account contributions.
Review your retirement savings regularly, understand your Social Security benefits, and establish clear retirement goals. Simple actions like increasing 401(k) contributions or varying retirement saving accounts can significantly impact your retirement income.
Retirement income varies considerably based on region. In some states, you might receive generous retirement incomes, while in others, you can expect payments below the annual national average of $27,617.
For instance, the District of Columbia has the highest average retirement income at $43,080 per year. Alternatively, Indiana has the lowest average, sitting at $20,542. This difference of about $22,000 highlights how your location can impact your retirement lifestyle.
This table shows the top 10 states by monthly retirement income. The complete data for all states ranges from $1,712 to $3,590 monthly.
As you move from regular employment to retirement, your income will likely shift from a single paycheck to several streams. Having multiple income streams helps minimize the risk — If one source underperforms, others can help cover the shortfall.
Here are five key retirement income sources to consider.
Some employers offer pensions, which provide you with a guaranteed monthly income after you retire. Pension benefits are typically based on how long you worked for the company and what your salary was.
While pensions are less common in today’s job market, they’re a valuable income source for those who have the option. Your retirement is more manageable if you’re receiving a steady monthly paycheck.
Social Security is a government initiative that offers monthly payments to retirees, determined by their earnings and work history. For many, it’s a critical income source that helps pay for necessities like housing, food, and medical care.
The amount you receive from Social Security depends on when you decide to start claiming your benefits. If you claim them early, your monthly payments will be lower, and if you wait until you reach your full retirement age — or even later — you can receive a higher monthly benefit.
Social Security alone typically isn’t enough to sustain most retirees. It generally accounts for about 30% of income for people over 65. You'll likely need additional earning sources, such as pensions, annuities, and personal retirement savings, to maintain your desired lifestyle in retirement.
You can strategically allocate investments to reduce risk and grow your returns over time. For instance, consider investing your earnings to buy more shares or units after retirement instead of withdrawing them.
For instance, if you earn and reinvest dividends from a stock, you gain from the original and new shares purchased with those dividends. This compounding effect can grow your investment portfolio.
Also, keep your investments balanced. Think about how much risk you’re comfortable with, how long you want to invest, and what you aim to achieve financially. You can always review and change your strategy to stay on track with your goals and build lasting security.
Grow your retirement savings by contributing to 401(k)s and IRAs using pre-tax dollars. You can increase your contribution and increase your take-home pay simultaneously. When you retire and withdraw monthly payments from the accounts, you’ll owe ordinary tax on your monthly income. This arrangement helps your savings grow efficiently and grants access to more funds when necessary.
Annuities are financial products that provide a consistent income stream. These are funded by either a lump sum deposit or multiple payments. You can start receiving earnings later or immediately, depending on your financial situation and the type of annuity you choose.
To plan for success, calculate how much you need to save for retirement ahead of time to ensure a reliable income for your later years. By building a strong financial foundation now, you can enjoy a secure and stress-free retirement.
Here are some critical strategies for enhancing your retirement income.
Annuities are insurance tools that can provide guaranteed income for life, helping ensure you don’t outlive your savings. You can choose your annuity type, whether fixed, variable, or indexed, to find one that fits your needs. For example, a fixed annuity may suit someone seeking stable, predictable payments, while a variable annuity might appeal to those looking for growth potential tied to market performance.
Combining earnings from Social Security, pensions, savings, and annuities creates a more stable income stream that weathers economic conditions well. You can also supplement your retirement income by exploring part-time work or freelance opportunities that match your interests and skills. Another option is investing in real estate or rental properties to provide a steady income stream.
Establish a practice of reviewing your retirement strategy at least once a year. Make sure you’re taking full advantage of any employer retirement matches, tax-advantaged accounts like 401(k)s, and catch-up contributions if you’re over 50.
If you can, wait to claim your Social Security benefits. When you reach full retirement age, every year you wait to claim benefits increases your earnings by about 8%.
Opt for the maximum contribution limits for retirement accounts like 401(k)s and IRAs.
For 401(k) plans, the contribution limit is $23,500. And if you’re 50 or older, you can add a catch-up contribution of $7,500, bringing your total to $31,000. Plus, if you’re between 60 and 63, a special rule under the SECURE 2.0 Act allows you to contribute an extra $11,250 as a catch-up, giving you a total of $34,750.
If you have an IRA, the contribution limit remains $7,000. And if you’re 50 or older, you can add $1,000 as a catch-up contribution, so $8,000 total.
Maximizing your contributions to these accounts can make a big difference in building a secure financial future. Small, consistent steps toward your retirement goals add up over time, giving you more peace of mind and flexibility in the years ahead.
Take control of your future with Gainbridge®’s digital annuities. ParityFlex™ annuity delivers guaranteed returns and a lifetime income stream. To simplify the process and cut down on costs, Gainbridge® removes the middleman with no hidden administrative fees.
Simplify your savings today and build the retirement you deserve.
This communication is for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice.
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1 Provided you account value hasn’t gone to $0 due to excess withdrawals. All guarantees are based on the financial strength and claims paying ability of the issuing insurance company. ParityFlex™ is issued by Gainbridge Life Insurance Company (Zionsville, Indiana). Learn more about ParityFlex™ and start building your retirement funds today.
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