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What Is A Good Monthly Retirement Income?

Senior looking at computer

When you retire, the goal should be to have enough savings and monthly income to maintain your lifestyle. To help you plan, we’ll share what a good monthly retirement is and sources of income you can utilize to fund retirement.

What’s a good monthly retirement income?

To maintain your lifestyle in retirement, most financial planners recommend aiming to replace 80% of your pre-retirement income. For example, if you earned $75,000 per year ($6,250 per month) before retirement, you should aim to have a post-retirement income of $60,000 per year ($5,000 per month). Retirement expenses may differ from when you were working based on several factors such as:

  • Age: As you get older, you’ll likely incur more healthcare costs including more frequent medical visits, higher insurance premiums, and long-term care expenses.
  • Health: The presence of one or more health conditions can add to costs in retirement, especially if you no longer have access to free or subsidized insurance from your employer.
  • Debts: In retirement, your financial situation may change as you pay off long-term debts like a mortgage, car payments, or student loans.
  • Financial Goals: After a lifetime of saving, you may choose to reallocate money that you were previously contributing towards a 401(k) or investments.
  • Lifestyle Changes: In retirement, your lifestyle may change which can impact expenses. Some people wish to travel more which can increase expenses, while others may wish to downscale their home in order to save money.

Before retiring, you should consider these factors and any others that could impact your expenses. Doing so will help you determine whether your living costs will increase or decrease, and if you have enough to retire comfortably. You can also speak with a financial advisor to help determine if you have enough money to retire, or how much more you need to save.

Average monthly retirement income

According to data from the U.S. Census Bureau, the median average retirement income for retired individuals 65 and older was $47,620 in 2021 ($3,968 per month). This is down from $48,866 ($4,072 per month) in 2020.

Sources of retirement income

When it comes to retirement, the saying “you shouldn’t stick all your eggs in one basket” applies. Having multiple income sources helps diversify your risk and ensure you don’t run out of money. 

Here are the most common sources of retirement income:

Social Security

You can start receiving social security benefits as early as age 62, and 8 in 10 Americans aged 65 or older receive social security income. For 61% of beneficiaries, social security makes up more than half of their total monthly retirement income, and it represents nearly all of their income for 33% of these individuals. The average social security benefits in 2023 are projected to be $2,559 per month, which is significantly higher than the $1,547 average from August 2022. Your benefits are based on your pre-retirement earnings and when you start receiving social security, so to maximize the amount you get, you should wait until you reach the full retirement age.  



Pension plans are becoming less common as employers opt for 401(k) plans, but some employers still offer pension plans that can be used as a source of retirement income. The average yearly pension is $10,788 for private pensions and annuities, $21,747 for a military pension, $22,662 for a state or local government pension, and $27,687 for a federal government pension. This means that depending on where you get your pension from, you can expect between $899 and $2,307 per month. 


Continued Employment

Retiring doesn’t mean you have to stop working completely. You may decide to quit your full time job and work elsewhere with fewer hours, a less stressful role, or even start your own small business. An AARP survey from 2022 found that 42% of people in retirement are still working, with 55% of respondents citing financial need as their reason for doing so. However, working after retirement can also be a great way to stay mentally sharp, interact with others, and establish a daily routine.


Financial Assets

The following assets can contribute to your monthly retirement income:

  • 401(k)
  • IRA
  • Real Estate
  • Annuities
  • Stock market investments
  • Life insurance policies

Some of these assets can provide a consistent income stream, such as renting out a property to receive monthly rent or using dividends from investments. Other assets can provide income from being sold, such as liquidating investments or cashing out a life insurance policy

Tips for maximizing your retirement income

With your livelihood at stake, stretching your dollar to its furthest will help ensure you can retire comfortably with a financial safety net. Here are a few tips to maximize your retirement income:

Delay social security benefits

Taking social security benefits before your full retirement age will reduce the payouts you receive. For example, a person born in 1960 or after who receives benefits at 62 instead of 67 (their full retirement age) would have their payout reduced by 30%. This means that a person eligible for $1,000 in benefits at their full retirement age would only receive $700. Spousal benefits are also reduced by receiving social security early. In this case, the spousal payout would be 35% lower ($325 instead of $500). If possible, wait until your full retirement age to ensure you receive full benefits.  

Contribute the maximum into retirement accounts

If you’re a few years away from retiring, contribute as much as possible into retirement accounts such as a 401(k) or IRA. The IRS has a “catch-up contribution limit” that allows people over the age of 50 to contribute more money than usual into these accounts to help prepare for retirement. In 2023, employees over the age of 50 can contribute $6,500 annually into an IRA and $7,500 annually into a 401(k). 



Use the 4% withdrawal rule

The 4% withdrawal rule is a retirement guidance that says you should withdraw up to 4% of your retirement portfolio’s total value in the first year. So if you have $800,000 saved (including investments), you can withdraw up to $32,000 in your first year of retirement. The following year, you’d adjust your withdraw by the amount you took out multiplied by inflation. So if inflation was at 5% in your second year of retirement, you’d withdraw up to $33,600 because 32,000 x 1.05=33,600. On the other hand, if inflation were to decrease by 5%, you’d withdraw up to $30,400 because 32,000 x 0.95=30,400. This strategy helps ensure you’re withdrawing enough to maintain the same purchasing power during inflation increase, but not too much when if it goes down.  


Cut down on unnecessary expenses

In retirement, it’s a good idea to look for any expenses that are no longer necessary or worth the time, money, and effort involved in managing. Common examples may include couples selling their extra car to reduce maintenance and insurance costs, or even selling extra properties to avoid taxes and reinvesting the proceeds. Life insurance is another expense that many people choose to get rid of in retirement. As the policyholder gets older, premiums can become unaffordable. Although you can stop coverage or surrender it to the insurance company, selling it will yield the highest payout, up to 60% of the death benefit value. You can contact us for a free estimate on your life insurance policy if you’re interested in selling it.

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Avery Logan

Avery Logan

Avery Logan is a writer for Harbor Life Settlements with expertise on insurance, finance, and senior care. He specializes in breaking down complex subjects in a way that's easy for people to understand so they can feel informed about what they're reading.

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