Average Retirement Income 2019: How Do You Compare?

Average Retirement Income 2019: How Do You Compare?

Retirement income doesn’t grow on trees… But you can make it grow!

As more and more baby boomers head into retirement, there is a growing conversation about how to generate adequate retirement income from retirement assets. However, many are going to come up short. According to the most recent research from Boston College, the percentage of retirees in 2019 who are at risk of not having enough is about 50 percent. And, this despite the fact that average retirement income 2019 is up, perhaps due to more seniors working longer. You can jump down to see average retirement income numbers for 2019.

What is the Average Retirement Income 2019 (And, Median Retirement Income 2019)?

Reporting on average retirement income can be tricky. The best income data does not include information about whether someone is officially “retired” or not. Retirement has no official definition — with many “retirees” still working. Retirement is more of a mindset these days.

Another note about the average retirement income numbers seen below, the best data comes from the US Census Bureau. The most recent data available is from 2017 and compiled in 2018. So, the economic changes we have seen over the last year are not necessarily represented in the data below. However, the numbers should be very close to reality for the average household.

Average Retirement Income 2019 by Household Age

Age of Household Median Income Mean Income
Households Aged 55-59 $73,645 $103,423
Households Aged 60-64 $63,919 $89,882
Households Aged 65-69 $54,124 $79,772
Households Aged 70-74 $46,797 $68,0052
Households Aged 75 and Older: $31,893 $49,614

SOURCE: Data is summarized from the US Census Bureau’s Current Population Survey(CPS) Annual Social and Economic (ASEC) Supplement. The CPS is a joint effort between the Bureau of Labor Statistics and the Census Bureau.

Does “Average Income” Seem Kinda High? Here’s Why

The table above shows both median and mean income. Median is always lower and is closer to the reality for most households of retirement age.

Mean: Mean or average income is calculated by totaling each household’s income and then dividing by the number of households. This number can be very deceiving.

Households earning the highest amounts of money will skew the data and make “average” incomes seem high.

Median: Median income is determined by organizing all income in order from low to high. The median income is the income in the exact middle of the list with half of the incomes being higher and half lower. Many statisticians think that median income is a more representative number.

The Numbers Still Seem High: Want a Less Optimistic Average Retirement Income Number?

The pension rights center reports that: “Half of all Americans age 65 or older have incomes of less than $24,224 a year – far less than the amount that most need to meet their day-to-day living and health care expenses.”

Why is this number so much lower?

The $24,224 number is for all individuals above 65 — not household.

And, you will notice that incomes fall pretty dramatically as you age. The median household income for households older than 75 is less than half the household income for household’s 60-64!

If you are worried about your retirement income, you want to create a detailed and comprehensive retirement income plan that calculates how much you will earn when you retire and whether or not that number is sustainable as you age.

Do Nationwide Averages Matter? What is the Average income in YOUR Zip Code?

The national retirement income averages might be interesting, but not useful to you. Afterall, there are huge differences in the costs of living and income across different cities and regions in the United States.

It is more relevant to consider how your income stacks up against others in your own zip code.

As mentioned above, you can get a quick and easy comparison by using the NewRetirement Retirement Planner.

This tool is consistently rated the best online retirement calculator because it is so comprehensive and useful. It is an easy to use system that can instantly tell you how your retirement income, expenses, assets, debt and net worth compare to other people in your own zip code.

Where Does Most Retirement Income Come From and How Can You Boost Yours?

What follows are the top 5 sources of retirement income for most retirees and how to boost your income from each of them.

1. Average Social Security Income 2019:

More than 85% of people 65 and older get Social Security. Among elderly Social Security beneficiaries, 50% of married couples and 71% of unmarried persons receive 50% or more of their income from Social Security.

A bit of good news: The average monthly Social Security income got a 2.8% boost for 2019 due to a cost of living adjustment. The boost raised the average monthly Social Security payment for retired workers to $1,461 in 2019 from $1,422 in 2018.

As you can see, retirees today are more dependent than ever before on Social Security income. One of the biggest problems with that approach is the fact that the program isn’t incredibly stable.

Another issue is that Social Security was never intended to be a primary source of income. It was only ever intended to supplement retirement income.

How to Boost Your Social Security Income: The best way to get more Social Security income? Postpone collecting your benefits until at least full retirement age or longer to get the maximum monthly payment. Delaying the start of Social Security can mean a BIG boost to your overall retirement wealth.

Despite the promise of more money, the most popular age to start benefits is 62. A full 42% of men and 48% of women start benefits at 62.

If you wait to start benefits, you might earn an additional $300 a month — or more. If you calculate that additional benefit over a 30 year time period, then waiting would mean $108,000 in additional retirement income.

If you are married, it is especially important that the higher earning spouse defers the start of benefits for as long as possible. Learn more about smart strategies for Social Security if you are married.

Use this Social Security Calculator to figure out the best time for you to start your benefits.

2. Average Retirement Income from Assets 2019:

According to the most recent Transamerica Retirement Survey, “thirty-nine percent [of baby boomers] expect their primary source of retirement income to be self-funded from accounts such as 401(k)s, 403(b)s, and IRAs or other savings.”

And, the Pension Rights Center reports similar estimates. They have found that that most older adults have little in savings. Only 66 percent receive income from financial assets. Half of those receive less than $1,754 a year.

The research is clear. The estimated median for baby boomer’s total retirement savings is inadequate to provide the income needed. Transamerica reports that baby boomers have saved a median of $164,000.

The good news?

$164,000 is a significant increase since 2007 when the median retirement savings were $75,000. The bad news is that this amount will not produce adequate income for most households.

If you were to use a common (though flawed) rule of thumb to withdraw 4 percent each year — adjusting for inflation as you go along — then $164,000 would only produce about $6,300 in retirement income (assuming a 4% annual return) in your first year of retirement.

How to Boost Your Income from Savings:

This is easy… save more! Okay, maybe not so easy.

  • If you are young, max out your 401(k) contributions or start an IRA. Keep up the contributions, and you’ll have a tidy sum when you retire.
  • If you’re midway through your working years, it’s a little tougher. Be careful about what you spend on family in this phase of your life. Try to focus on making catch up contributions.
  • Retired or Almost Retired? Perhaps the best way to boost your retirement income from savings is to actually spend less! Your savings will last a lot longer if you are spending less. (Here are 20 ways to cut retirement costs.)

You may also want to explore the best way for you to turn your savings into retirement income. Or, explore using a bucket strategy. It maximizes the growth of some of your assets while minimizing risk on others.

3. Average Retirement Income from Pensions:

A mere 31 percent of today’s retirees have retirement income from a pension, a 6% drop over recent years. This number is trending further downward. Consider yourself extremely lucky if you have this income!

Very lucky in fact: Older adults who have pensions typically have at least twice the income of those living only on Social Security

The median annual pension benefit ranges between $9,262 for private pensions to $22,172 for a federal government pension and $24,592 for a railroad pension.

How to Boost Your Pension Income:

You cannot exactly boost your pension payments. You can make sure that you are making the right choice between getting monthly payments vs a lump sum. Additionally, you should periodically check with your plan administrator about the health of the funds. Many pensions are underfunded.

4. Average Retirement Income from Work:

Work after retirement is becoming an important part of retirement income.

According to the Bureau of Labor Statistics:

  • Among 65- to 74-year-olds, labor force participation is predicted to hit 32 percent by 2022, up from 20 percent in 2002.
  • At age 75 and up, the rate will jump from 5 percent in 2002 to 11 percent in 2022.

And, other studies predict work after retirement age to be even more common. Transamerica estimates that two-thirds of all baby boomers plan to or already are working past age 65 or do not plan to retire.

According to the AARP, the median retirement income earned by retirees from work is $25,000 a year.

How to Boost Retirement Work Income:

Delaying your retirement is the first option you might want to look at. Or, if you don’t already have a retirement job, you should consider one.

It doesn’t need to be 9-5. It does not need to be high stress. In fact, you should look for work that you really enjoy doing and let the income be a bonus.

Any work income is going to be tremendously beneficial — both financially and for your intellectual and social well being as well. Explore the benefits of work after retirement and the best jobs for retirees. Also, have you considered passive income sources?

5. Public Assistance or Veteran’s Benefits:

The Pension Rights Center reports that about 7 percent of retirees are getting help from government sources.

For those retirees getting public assistance, the median benefit ranges between $5,866 to $6,542 (depending on your exact age).

How to Boost: There are quite a few different programs that help low-income seniors. For Veteran’s benefits, consult with the Veteran’s Administration or explore answers about veteran’s benefits.

Important Trends for Retirement Income 2019 and Beyond

Average retirement income 2019 is somewhat driven by choices retirees made long ago — where did they work, how much did they save, did they buy a home and more. However, retirement income is also driven by decisions retirees make today and trends driving the economy:

More Focus on De-accumulation:

Traditionally the concept of retirement planning has focused on saving. However, in retirement you need to know how to spend your savings — this is often referred to as de-accumulation.

With baby boomers retiring in record numbers, companies are refocusing efforts on helping retirees know how to turn their assets into income. If you are working with a financial advisor, make sure they have a focus on retirement — not accumulating assets.

Future of Social Security and Medicare:

Social Security and Medicare are in real financial trouble. If you are of retirement age now, your benefits are probably not in peril.

However, nothing is certain and if you dive into the numbers, you can see that there are very real concerns about the future of these programs that provide the lion’s share of retirement income.

Pension Plans:

Like Social Security and Medicare, many pension plans are under funded. If you are lucky enough to have a pension, it may be worthwhile to investigate your plan’s solvency.

Interest Rates:

While still historically low, interest rates have been slowly trending upward. This is bad news if you are carrying debt. However, it is good news if you are trying to get guaranteed returns on savings.

Stock Market Returns:

After 10 plus years of a bull market, stocks started giving some uneasy signals at the end of 2018.

Retired investors could face difficulties if a market correction occurs.

As such, there may be an increased demand for investments that offer less risk or downside protection like bonds, lifetime annuities, real asset funds and more…

Increased Interest in Deferred Lifetime Annuities:

According to LIMRA, deferred lifetime annuities (also known as longevity annuities) are growing in popularity. A deferred lifetime annuity is an insurance product that guarantees a monthly paycheck to start at a future date you determine. See what kind of future income you could afford by using the lifetime annuity calculator.

Home Prices:

You might not immediately think of your home as having an impact on your retirement income. However, your home is most likely your most valuable financial asset and there are various ways to turn your equity into retirement income.

That is why it comes as bad news that home prices may be plateauing.

There are many ways that you can tap into your home equity to help maximize your wealth, add to your retirement income or make other assets last longer. Reverse mortgages are an increasingly popular option. Downsizing is another possibility.

Retirement Income 2019 is Only Part of the Equation

Knowing about average retirement income 2019 is interesting and one way to benchmark your financial health.

However, knowing your own projected retirement income from now throughout retirement and also calculating your future spending is the key to a secure retirement.

Source: Newretirement
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