Average Retirement Income

Is there an average retirement income? I think not.

Just like any other age group in society, retirees are diverse financially.

The average retirement income is a statistic alone.

If your retirement income is lower, you feel bad. If higher, you think you are well off and might spend more than you should.

Instead, let's look at a different way to look at retirement income. 

I am a CSA, a Certified Senior Advisor, thus the following...

Average Retirement Income Categories

The Society of Certified Senior Advisors classifies senior income in three categories (not average retirement income - but specific low, middle and high income) that makes sense to me.

The amounts shown below are taken from my CSA manual (published in 2005).

Lower Retirement Income

  • Less than $30,000 annual income (not assets)

These retirees are concerned with basic daily living needs: how to pay for housing, food, the high cost of prescription drugs, etc. This might be the senior asking for a weeks worth of her prescription from the pharmacist because she can't afford a whole month (or she won't eat)... how sad is that?

Income is more important that assets for lower and middle income retirees. Middle Income seniors may slip into this group later in life as their assets are reduced (or gone). Reverse mortgage for seniors (if a home owner) might help this group.

Middle Retirement Income

  • $30,000 - $80,000 annual income (not assets)

Income is more important that assets and the home is often the largest asset owned. Income comes from several sources making it more complex to juggle: retirement earnings, pensions, investment withdrawals, Social Security.

These folks are concerned with outliving their assets which is easily possible today with investment reductions, longer life expectancies, ever-increasing health care premiums, etc.

They hope to earn a supplemental retirement income. They may be supporting family members, both adult children and older parents, but really don't have the unending resources to do so.

These folks have lots to consider! This retirement stuff isn't easy!

High Net Worth Retirement Income

  • $1-million plus in assets, not including the primary home

These folks are concerned with taxes, growing their wealth, providing for their heirs and charities. Most of these retirees earned their assets from owning a business. These folks have financial consultants and won't likely be reading my website, so I'll leave them as is.

One more thing... check out the Decision Decade.

Click to discover the Decision Decade errors that so many make as they get closer to retirement.. it's important!

Being aware of this issue simply allows you to pass it along and not fall into this mindset!

Does "average" retirement income matter?

Personally, I'm not sure “average" retirement income should really matter... your retirement income should be somewhat in line with your income prior to retirement.

If you had a clerk's income in your working years, your retirement income is also a clerk's retirement income. If you were a high-paid manager, ditto... Your pension (if any), your savings, and your Social Security benefit all follow your lifetime earnings. Right?

It's like asking what the average retirement age is.  It's a very personal decision...

Average Retirement Income Statistics

According to EBRI (Employee Benefit Research Institute), the average income for age 65+ was $29,200.+ (in 2008).

UPDATE: Per AARP, In 2012, people aged 65 and older had an average (mean) income of $31,742, but half (median) had income less than $19,604. Social Security benefits are the primary income source for many older Americans.

How will Retirement Income Last?

We are all concerned about how our retirement income years will play out. If you had no pension and no retirement savings, it looks like you might have some tight retirement years ahead!

Now if the clerk saved oodles over the years, simply living a frugal lifestyle or living on her husbands income alone and saving her salary – THEY might have the larger retirement savings accounts over others with more earnings, right?

OR if the Manager was a big spender in her working years, she might have little in her retirement years.

It really depends on the retiree and their own lifelong savings/spending practices.

Finally, you do need savings for inflation (cost of living increases) too. Even if you could live on $1000/mo average Social Security payment alone – that same $1000 is worth lots less 10 or 20 years down the road. Yes, Social Security recipients get cost-of-living increases most years, but Medicare deductions eat the raises up.

On inflation: Yes inflation is real. For example,  $50,000 in 1980 was worth $147,000 in 2009... now THAT is inflation!  Granted that is an almost 30-year period, and the dollars tripled in that 30 year period.

Hope this helped you some with Average Retirement Income thoughts!