What Is the Average Retirement Income?

The difference between the average retirement income in the U.S. and the median retirement income in the U.S. is both substantial and important. The average blends the highest and lowest incomes together, resulting in $83,085. The median is the exact middle of incomes. That means half of Americans 65 and older have an income of less than $52,575 a year, while half have more.

The amount of retirement income you need is a flexible and moving target. Your assets, expenses, health and plans will all play a part in how much income you require in your retirement. Even where you live makes a difference, as some states and cities have a higher cost of living than others.

When it comes to retirement income, “good” is entirely relative. An amount that would be more than enough for one household may be insufficient for another. Your health, location, assets and desires combine to create a retirement income that is good for you.

As a starting point, AARP suggests you’ll want roughly 80% of your previous income when you retire. If your income was $100,000 before retirement, for instance, you’d want approximately $80,000 once you retire.

You won’t need to pay the same amount into Social Security as when you were working, and you’ll no longer add to your retirement savings in the same way. Any work-related expenses you regularly incurred will also be eliminated.

That’s just a general guideline, however. Depending on what you want your retirement to look like, or what you hope to do, you might want to adjust that percentage up or down. Creating a retirement budget is a good way to keep yourself on track.

The Employee Benefit Research Institute (EBRI) is a nonpartisan research organization dedicated to furthering equitable public policy. The institute conducts regular studies into the financial health and well-being of retirees.

In 2022, the institute’s survey reported that half of respondents spent less than $2,000 each month. One third spent $2,000-$3,999, and 16% spent $4,000-$6,999. Three percent of respondents spent more than $7,000 every month.

The largest portion of their spending went to housing: nearly a third across categories. The next biggest expenditure was on food. Food prices can rise dramatically during periods of inflation.

Another large expense category was health care. Although housing costs tend to decrease with age, health care costs often rise.

How you receive your income will depend on choices you made long before retirement, back when you first created your retirement plan. Your retirement income can come from a variety of sources. In fact, having multiple income streams in retirement is a key component of maintaining financial security.

Social Security is the most common form of retirement income. In 2023, the Social Security Administration (SSA) expects almost 67 million Americans to receive Social Security benefits every month, 48.6 million of whom will be retired workers.

Social Security is not intended to be your sole source of income in retirement. Fortunately, it’s not the only option. According to the Federal Reserve, 79% of retirees have one or more sources of private income.

Being retired doesn’t always mean you stop working for good. Employment is the second largest provider of income among households aged 65 older, contributing 19.3% of total income. If you are receiving Social Security, note that working may have an impact on your benefits, depending on your full retirement age.

Financial insecurity is not the only reason to return to work after retirement: Many retirees choose to start businesses, pursue work that interests them, or add intellectual or social interests to their daily lives. In fact, 27% of retired adults who continue to work in some capacity consider themselves fully retired.

Social Security is designed to support financial security and stability, rather than be your main source of income. That said, Social Security makes up the largest portion of retirement income, about 30%. In fact, almost 90% of people aged 65 and older received a Social Security benefit in December 2022.

Both lower and higher income households receive Social Security, though households with the top and bottom 10% of income amounts receive less than the other 80%, according to a February 2022 U.S. Census Bureau report. In households aged 65 and older, Social Security represents a little more than half of total income.

Fifty-seven percent of retirees also have income from pensions, a benefit received from their former employer. Upon retirement, workers are sometimes given the choice to take their pension in a lump sum, but more often you would receive a regular annuity. The size of your payment will depend on how long you worked at the company, the salary you earned and your age.

With a defined benefit pension, you receive a set amount of retirement income every month from your employer. This is a more traditional pension plan, paid for by your employer.

With a defined contribution pension, you contribute a specified amount of your pre-tax income to an account dedicated to you, and those funds grow tax free. Sometimes your employer will also contribute or even match your contributions. 401(k)s are an example of defined contribution pensions.

Defined benefit pensions are vanishing from the employment landscape. But defined contribution pensions are increasing. In 2022, 62% of civilian workers had access to a defined contribution plan through work, according to a U.S. Bureau of Labor Statistics Employee Benefits Survey.

Individual investments can also provide other streams of income during your retirement. IRAs and Roth IRAs are individual accounts that you can contribute to on your own schedule and can include stocks, bonds and mutual funds.

IRAs give you a tax-deduction when you contribute, but you pay taxes on the money you withdraw. There’s no tax deferment when you contribute to a Roth IRA, but you won’t pay tax on the money you withdraw.

Other personal income streams could include interest or dividends on investments, other annuities or property income like tenants or even Airbnb.

With 80% of your salary as a basic guideline, how much retirement income you need will depend on several factors, all of which combine to make up the kind of lifestyle you want from your retirement.

You’ll need to consider your anticipated everyday expenses, your life expectancy and potential health care costs, and the cost of living where you are.

Your retirement income is a moving target. As you save for retirement your plans might grow or change — so too will your income needs. Use our retirement planning calculator to examine your retirement savings and see if you’re currently on track.

Where you live will have an impact on how much retirement income you will need. Some cities and states have a higher daily cost of living than others. Home and utility costs, food and gas prices, and life expectancy all come into play. Urban areas will likely offer more options when it comes to activities and entertainment, while suburban and rural areas will often be less expensive.

The table below contains information on the percentage of householders 65 years and older who receive retirement income, ordered by state. Retirement income includes income from pensions, annuities and Social Security, among other sources. RetireGuide built the table according to data collected from the 2021 American Community Survey (ACS) conducted by the U.S. Census Bureau.

The manner in which you withdraw from your retirement savings will also influence the amount of your income.

The 4% rule is one approach. In 1994, William Bengen advised you should withdraw 4% of your savings in your first year of retirement, then continue to withdraw that amount, indexed for inflation, each year. Economic research company Morningstar recently published a report concluding that 3.8% was a more realistic option.

The bucket method is another method to use when planning and withdrawing from your retirement savings. With this strategy, you separate your retirement investments into three buckets: short-term, intermediate and long-term savings. It may help to get advice from a trusted financial advisor to properly take advantage of this strategy.

Finally, you could use a fixed-percentage or fixed-dollar withdrawal method of withdrawal. As the name suggests, with this method you would withdraw the same dollar amount or percent each time. Although this strategy does not account for inflation, it provides a very steady and reliable amount of income.

If you’re worried you haven’t saved enough, you might consider buying an annuity. Available from insurance companies, annuities are designed to mitigate the risk of using up your retirement savings. Offering both a steady income and tax-deferred growth, you can buy annuities on an installment plan or with a lump sum.