Wondering how your retirement savings stack up to other Americans’ nest eggs? Or whether your income in your post-work years will be enough to keep you afloat? It’s normal to be curious about the average retirement income in the U.S. Just remember that you need enough in your retiree days to meet your own needs, not to keep up with the Joneses.
A financial advisor can help you create a retirement plan for the future. Speak with an advisor today.
Average Social Security Retirement Income
We all know that saving for retirement is the wise course of action. That’s why we have Social Security, a form of forced savings that diverts income from our working years to our golden years. Social Security benefits were never designed to be Americans’ sole source of retirement income, though. That’s why saving for retirement, either through an employer-sponsored plan or on your own, is so important.
According to the Social Security Administration, Social Security benefits make up about a third of the income of the elderly. In general, single people depend more heavily on Social Security checks than do married people. At the end of 2023, the average monthly retirement income from Social Security was $1,781.63.
Keep in mind, though, that your Social Security benefits could be smaller. If you don’t have 35 years of work under your belt when you start claiming benefits, if your earnings were consistently low or if you claim benefits starting at age 62 rather than waiting until your full retirement age (or age 70, if you want maximum benefits), then you can expect a small monthly check. There’s also a gender gap in Social Security income. Women, because they tend to earn less and work for fewer years, draw smaller Social Security checks than men do.
Do you need help figuring out your required minimum distributions? Try SmartAsset’s RMD calculator to learn more.
The more money you make during your career, the greater the gap between your income needs and your Social Security benefits. Say you’re a family of four with two high earners, a big fancy home and a high-roller lifestyle. You’ll have a much harder time getting by on Social Security than would someone who can handle a lower-middle-class income. That means you’ll need to allocate a healthy sum to retirement savings during your working years or risk a downturn in your quality of life in retirement.
If you’re married, remember that your retirement-related decisions affect your spouse, too. The amount a surviving spouse can get from Social Security depends on the other spouse’s work history – and on when that spouse claims Social Security. In other words, the spouses of folks who start claiming Social Security at age 62 will receive less money in survivor benefits.
Average Retirement Income From Savings
You may have heard about an impending retirement income shortfall in the U.S. Words like “crisis” and “disaster” appear in plenty of articles that lament Americans’ lack of retirement savings.
According to the National Institute on Retirement Security, almost 40 million households have no retirement savings at all. RetirementUSA estimates that the current retirement savings deficit is $6.6 trillion at the end of 2023.
What does that mean? Well, the EBRI report aggregates the savings deficit of all U.S. households headed by someone between the ages of 35 and 64, inclusive. In total, those households have $3.8 trillion fewer dollars in savings than they should have for retirement.
For more recent data, Fidelity Investments reported that in the third quarter of 2023, the average account balance for an IRA was $113,800 and for a 401(k) it was $112,400.
Fidelity also estimated that “an average retired couple aged 65 may need approximately $315,000 saved (after tax) to cover health care expenses in retirement.” Keeping in mind that more Americans are also living longer than ever before, they will face more challenges to cover medical expenses in retirement.
Drawing Down Retirement Income
According to Gallup, the average retirement age is now 62. Let’s say you’ve done a stellar job of saving for retirement. You’ve decided to hang up your hat and begin the post-work phase of life. How do you know how much you can safely withdraw from your retirement accounts to live on?
Unless you buy an annuity, you’ll have to make that decision based on your spending needs and on the performance of your investments. That’s why the typical recommendation – that a retiree follows a 4% annual withdrawal rate – isn’t foolproof.
Our retirement calculator assumes that you’ll draw down your retirement income in a strategic fashion, letting tax-deferred accounts grow for as long as you can and spending from accounts with Required Minimum Distributions before you touch Roth accounts, to meet a specific lifestyle (either extravagant, similar to today, modest or budget-conscious). No 4% rule here.
Bottom Line
Social Security benefits are great, but they’re not much on their own. If you want to be able to supplement your Social Security checks with other retirement income, start saving. The earlier you begin contributing to a retirement account, the more financial comfort you can expect in your post-work years. When it comes time to draw down your retirement savings, it’s important to be strategic. This will help you to optimize the savings you worked so hard to accumulate.
Tips on Retirement
- Consider working with a financial advisor to develop, implement and fine-tune a financial plan for your retirement goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Are you saving enough for retirement? SmartAsset’s free retirement calculator can help you determine exactly how much you need to save to retire.
Photo credit: ©iStock.com/© Catherine Yeulet, ©iStock.com/shapecharge, ©iStock.com/shapecharge