Figuring out how much money you will need to save to live a comfortable retirement is no easy task. There are many factors to consider, such as age, health, and lifestyle. This financial planning guide will explore what is considered an excellent monthly retirement income and offer tips on achieving it!
Table Of Contents
- Average Retirement Income In 2021
- What Is A Good Retirement Income Per Month?
- Ways To Determine How Much Income You Will Need
- How To Determine How Much Monthly Retirement Income You Need
- How Much Guaranteed Income Can Your Retirement Account Generate?
- Monthly Retirement Income Calculator
- Retirement Income Comparison
- How To Protect Your Retirement Income And Savings From Inflation
- Next Steps
- Frequently Asked Questions
- Related Reading
- Request A Quote
Average Retirement Income In 2021
According to U.S. Census Bureau data, the average retirement income for retirees 65 and older in the United States decreased from $48,866 in 2020 to $47,620 in 2021.
However, the average retirement income doesn’t matter because everyone wants a different retirement lifestyle at various retirement ages.
Average Retirement Income By Age
| Age Range | Median Household Income |
|---|---|
| 55-64 | $75,842 |
| 65+ | $47,620 |
More Details: https://www.census.gov/library/publications/2022/demo/p60-276.html
What Is A Good Retirement Income Per Month?
Determining how much retirement money you need coming in every month is difficult, as it depends on many factors. Of course, retirement age, health, and lifestyle are all critical considerations. But, generally speaking, most experts agree that you will need 70-80% of your pre-retirement income to maintain your standard of living in retirement.
For example, if you earned $50,000 per year ($4,167 a month) before retiring, you would need approximately $35,000-$40,000 per year in retirement. Of course, this example is just a general guideline.
Your actual needs may be more or less dependent on your circ*mstances. For example, if you are relatively young and healthy, you may get by on less income than someone older and have health issues. Conversely, if you have an active lifestyle and enjoy traveling, you may need several income streams than someone content to stay home.
Use our monthly annuity calculator to estimate how much monthly income you could receive from your retirement portfolio for the rest of your life.
Ways To Determine How Much Income You Will Need
There are several ways to determine how much income you will need in retirement. One method is to use the “50-30-20” rule of thumb. This rule suggests that you allocate 50% of your income to essential expenses, 30% to non-essential/discretionary expenses, and 20% to savings. This thought process can be a useful starting point, but remember that it is just a general guideline, and your actual needs may differ.
Another way to estimate your retirement income needs is to use the “80% rule.” This rule suggests that you will need 80% of your pre-retirement income to maintain your standard of living in retirement. This is a more conservative estimate than the 50-30-20 rule, but it can be a good starting point if you are unsure how much income you will need.
How To Determine How Much Monthly Retirement Income You Need
Calculating your expenses is the first step in determining your retirement income needs. This includes your fixed costs, like housing and utilities, and your variable costs, like food and entertainment. Once you have an accurate picture of your spending, you can start thinking about how much money you will need to save.
A good rule of thumb is to have enough to cover your retirement expenses for at least three to five years. This will ensure that you have a cushion in case of unexpected costs or a drop in income.
If you are unsure how much you should save, many online retirement calculators and annuity calculators can help you estimate. Once you know how much you need to save, you can develop a plan to reach your personal finance goals.
There are many ways to save for retirement, such as 401(k)s, IRAs, and annuities. Which option is best for you will depend on your circ*mstances. However, the most important thing is to start saving as early as possible. The sooner you start, the more time your retirement funds have to grow!
How Much Guaranteed Income Can Your Retirement Account Generate?
Many people are worried about how they will survive financially after retirement. According to a United States Census Bureau report, Social Security income accounts for over 50% of retirees’ total monthly income. Only 17.2% of earnings come from retirement accounts.
Social Security benefits may not be enough to cover all of your expenses, and you may be hesitant to dip into your savings. An annuity gives you peace of mind of knowing you will have a good retirement income for the rest of your life. With a retirement withdrawal calculator, you can estimate how much you need to contribute to an annuity to retire comfortably.
In addition, an annuity can be a wise investment even if you have other retirement savings, as it can help to hedge against inflation and market volatility. For these reasons, an annuity is an important retirement planning tool that should not be overlooked.
Monthly Retirement Income Calculator
Annuities guarantee an income for the rest of your life. Use our retirement calculator to determine how much monthly income your savings can generate now or in the future. Then request a free quote below.
Note: Income = Annual Payouts
Note: You can purchase an annuity (with no tax penalties) with your 401(k), IRAs, retirement accounts, investments, and cash.
https://www.youtube.com/watch?v=l2C3uMBVCJc
Retirement Income Comparison
The table below compares the average income that can be withdrawn from investment accounts safely regardless of retirement age.
| Features | Annuity | 401(k) | IRA | Roth IRA |
|---|---|---|---|---|
| Withdrawal Percentage | 5.20% – 6.55% | 4% | 4% | 4% |
| Can Income Increase? | Yes | Yes | Yes | Yes |
| Can Income Decrease? | No | Yes | Yes | Yes |
| How Long Will Money Last? | Lifetime | 30 Years+ | 30 Years+ | 30 Years+ |
| Annual Fees | 0 – 1.50% | 1% – 4% | 1% – 4% | 1% – 4% |
| Taxation | Taxable/Tax-Free | Taxable | Taxable | Tax-Free |
| Death Benefit | Account Balance | Account Balance | Account Balance | Account Balance |
Example: A 60-year-old retiree starts withdrawing immediately from their $1 million portfolio, they would receive:
- Annuity: Between $52,000 and $61,000
- 401(k): $40,000
- IRA: $40,000
- Roth IRA: $40,000
How To Protect Your Retirement Income And Savings From Inflation
While many think of an annuity as a fixed income, some annuities offer the ability to increase payments to keep up with inflation. This retirement security is important because it can help to maintain the cost of living and prevent the purchasing power of retirement savings from declining over time.
Below is an example of a 64-year-old retiree who, with $100k, purchased an increasing income rider. They began with an annual payout of $4,750. By the time they reached 75 years old, their yearly income had increased to $8,581 and continued to grow even after the money in their account ran out.
https://youtu.be/7Q0GIkg2p4k
Next Steps
Once you have a retirement savings plan, it is essential to stick to it. Review your budget regularly and make adjustments as needed. Don’t be discouraged if you hit a snag – keep working towards your goal!
Saving for retirement can seem like a daunting task, but it is possible to achieve a comfortable retirement income. Planning and taking advantage of employer-sponsored retirement plans can make your dream a reality.
Planning for retirement is all about timing. Contact us below for help in retirement income planning. We can pinpoint when your retirement accounts and Social Security payments layered together add up to meet the average monthly retirement income. The service is free of charge.
Request A Quote
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Frequently Asked Questions
What is an excellent average retirement income?
You will need 70-80% of your pre-retirement income to maintain your standard of living in retirement.
Can I retire on $3,000 a month?
Whether you can retire on $3,000 a month depends on several factors, including your living expenses, retirement savings, and Social Security benefits. If you have a low living cost and can supplement your income with a part-time job or a generous pension, then retiring on $3,000 a month is certainly possible. However, if you have a high living cost or rely solely on Social Security benefits, retiring on $3,000 a month may be more difficult. Consider waiting until full retirement age.
Is $6,000 a month suitable for retirement?
Between healthcare costs, inflation, and the need to maintain a comfortable lifestyle, many retirees rapidly run through their savings. As a result, it’s crucial to have a retirement plan that includes a healthy mix of savings and income sources. For some people, that might mean working part-time during retirement. For others, it could mean downsizing to a smaller home. And for some, it might mean relying on a monthly pension or Social Security check. So the answer to the question “Is $6,000 a month good for retirement?” depends on your circ*mstances. But if you can supplement your retirement income with other savings or sources of income, then $6,000 a month could be a good starting point for a comfortable retirement.
Which state has the lowest average retirement income?
Indiana has the lowest average retirement income, with $20,521 annually ($1,710 a month).
Related Reading
- How To Protect Your Retirement Income From A Recession
- Should I Wait Until Full Retirement Age?
- 401k Payout Calculator
- Individual Retirement Account Calculator
- How Much Can I Withdraw From My Roth IRA Accounts?
- How Much Is My IRA Projected To Be In The Future?
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