Average Retirement Income: What is a Good Monthly Retirement Income?

How much do you need when you retire?

Ask the experts and the numbers are all over the place.

Some say look at your current budget and take 70%. Others suggest you predict what you want to spend and base it on that. Others suggest that you protect your nest egg and budget to use 4% each year. Or, work with a financial planner to help you arrive at what you can spend (fee only!!!).

The reality is that no one truly knows… except retirees that are in retirement.

So why not ask them?

Fortunately, you don’t have to ask them. The U.S. Census already does!

And then those surveys get piped over to the Bureau of Labor Statistics where they put it together into nice consumer reports that explain how much retirees are earning and spending.

From that, you can decide whether you, with your nest egg and future government benefits, will have a good retirement income to enjoy your golden years.

Table of Contents
  1. Where We Got Our Data
  2. Average Spending of Retirees
  3. Average Income of Retirees
  4. Average Assets of Retirees
    1. That’s a Lot of Real Estate
    2. That’s Not a Lot of Retirement Assets
    3. Stocks & Mutual Fund Shares
  5. Average Retirement Income

Where We Got Our Data

The Bureau of Labor Statistics publishes an annual Consumer Expenditure Survey that, among other things, reports how Americans are spending their money.

One of the reports breaks out the spending by the age of the reference person, with the latest data coming from 2021.

Two caveats to consider:

  • The data below covers all of the United States. There are other reports, further down the BLS website, where you can look at data for a region (Midwest, Northeast, South, West) as well as by size of consumer unit (number of people) and more. As we all know, spending varies across the nation and some areas have a higher cost of living compared to others.
  • This is data from the Bureau of Labor Statistics and it was collected by the Census Bureau through the use of surveys. This means the information is reported by individuals and not collected by some means with legal ramifications, such as with filed tax returns.

Regardless of these caveats, I think the data is still worth reviewing.

Average Spending of Retirees

We have spending for all age groups and the older groups are broken out into 55-64, 65-74, 65+, and 75+. For the purposes of “retirement,” we will consider anyone 55 and older to be potentially retired.

Here is the data on spending:

Item 55 – 64 65+ 65 – 74 75+
Average Annual
$70,570 $52,141 $56,435 $45,820
Food $8,419 $6,490 $7,052 $5,669
Food at home $5,523 $4,497 $4,755 $4,121
Alcoholic beverages $591 $439 $526 $311
Housing $23,007 $18,872 $20,078 $17,098
Apparel and services $1,742 $986 $1,157 $737
Transportation $10,936 $7,160 $8,356 $5,392
Healthcare $6,093 $7,030 $6,966 $7,123
Entertainment $3,700 $2,889 $3,412 $2,119

I was surprised to see housing take up such a big percentage though I wasn’t surprised by transportation (lots of travel?) or healthcare. Long-term care is a always big concern as you age, so much so that long-term care insurance is a big thing now (do you need long-term care insurance?).

It appears that retirement spending tends to be around the $50,000 – $55,000 a year mark, with it going down as you get older. I’m not surprised that the 75+ category spends less on housing and travel, though the uptick in healthcare isn’t too pronounced.

We must also keep in mind that the life expectancy in the U.S. for 2021 is 76.1 years. This is the most recent data released on August 31st, 2022, so we may see an update in a few months by the CDC.

Average Income of Retirees

Here is the data on income:

Item 55 – 64 65+ 65 – 74 75+
Income Before Taxes $98,793 $55,335 $63,319 $43,538
Income After Taxes $85,573 $53,149 $59,872 $43,217
Wages & salaries $98,793 $55,335 $63,319 $43,538
$8,529 $3,046 $4,216 $1,318
Social Security, private &
government retirement
$7,022 $28,516 $27,424 $30,130
Interest, dividends,
rental income, &
property income
$3,164 $3,431 $3,406 $3,469
Public assistance,
$709 $337 $373 $284
Unemployment and
worker’s comp, veteran’s benefits,
regular contributions for support
$1,428 $810 $794 $835
Other income $286 $177 $152 $213

This table, which is pulled from the BLS report, only covers income. As we know, this is what is reported for tax purposes but a retiree’s spending doesn’t come solely from their income. They have assets too.

Of course, some of their income is the result of their assets such as interest, dividends, rental income, and property income.

For most of the age groups, the income exceeds expenditures. It isn’t until you get to the 75+ group that you see a median income below expenditures.

But, for a full picture, we should look at their assets too.

Average Assets of Retirees

For that, we need to rely on the same dataset we used to find the average net worth of Americans – U.S. Census Bureau. The data is comparable but it relies on a different time period, the U.S. Census Bureau data is from 2021, released in 2022.

Age of Householder Median Net Worth
Under 35 years old: $22,000
35 to 44 years old: $97,740
45 to 54 years old: $166,600
55 to 64 years old: $230,900
65 to 69 years old: $285,100
70 to 74 years old: $326,700
65+ years old: $300,000
75+ years old: $292,800
Source: U.S. Census Bureau, Survey of Income and Program Participation, Survey Year 2021

That’s the top-level number, if we dig a little deeper we can find out what their assets are (note that the Census data breaks out the 65 – 74 age group into two):

Item 55 – 64 65+ 65 – 69 70 – 74 75+
Net Worth $230,900 $300,000 $285,100 $326,700 $292,800
Checking Accounts $2,800 $3,000 $3,000 $3,000 $3,250
Other Interest-Earning Accounts $7,500 $12,000 $10,100 $12,000 $13,300
Other Interest-Earning Assets 2,300 $10,000 $5,700 $7,050 $11,000
Stocks & Mutual Funds $58,100 $100,000 $100,000 $95,000 $120,000
Equity in Business
or Profession
$10,000 $5,000 $6,000 $3,450 $3,000
Equity in Home $162,000 $200,000 $190,000 $200,000 $200,000
Equity in Vehicles $10,470 $10,060 $10,720 $11,330 $8,860
Rental Property Equity $154,000 $200,000 $222,000 $177,000 $180,000
Other Real Estate Equity $80,000 $100,000 $80,000 $70,000 $140,000
IRA / Keogh Accounts $100,000 $127,000 $146,600 $148,000 $100,000
401(k) & Thrift Savings Plan $92,000 $78,000 $84,800 $96,500 $62,000
Educational Savings Accounts $21,000 $15,100 * * $30,000
Annuities & Trusts $146,000 $121,000 $126,000 $150,000 $118,500
Cash Value Life Insurance $15,000 $15,000 $15,000 $15,000 $15,000
Other Assets $10,000 $11,000 $15,000 $10,000 $10,000
* indicates sample size was too small

That’s a Lot of Real Estate

What jumps out to me is just how much of each age group’s net worth is tied up in real estate or motor vehicle equity. This is what jumped out to me whenever I looked at this data to learn more about the net worth of the average American.

When you sum up the four equity values (Equity in Own Home, Equity in Motor Vehicles, Rental Property Equity, and Other Real Estate Equity), the sum is actually higher than their net worth. This is because the median net worth individual is not the same person as the one with the median equity value for any of those four columns.

With what we know about wealth distribution in America, these are certainly very different people.

Regardless, it does paint a picture about why real estate is so celebrated in the United States:

  • 55 to 64 years – 176%
  • 65 years and over – 170%
  • 65 to 69 years – 176%
  • 70 to 74 years – 140%
  • 75 years and over – 181%

The big takeaway, initially, for me here was that a huge component of retirement is owning your own home and trying to avoid having significant expenses in housing. But when you look at expenses, housing was still the biggest budget line item! (transportation was a distant second)

From this data, it’s hard to know whether this is because of the mortgage or all the other costs associated with owning a home. When you look further down the table though, they do have information about how much they’re paying for a mortgage (under Other Financial Information). Based on that, housing tended to be 30% or more of income – which is too high if you’re in retirement.

That’s Not a Lot of Retirement Assets

Compare that to the retirement accounts and we see a completely different picture:

  • 55 to 64 years – $140,000
  • 65 years and over – $150,000
  • 65 to 69 years – $166,000
  • 70 to 74 years – $178,900
  • 75 years and over – $117,000

That’s not much!

If you started saving at 25 and got a modest 6% annual return, you only need to save around $145 a month to have more than $140,000 at the age of 55.

With retirement assets, here’s where it starts to get tricky. With traditional retirement accounts, these are tax-deferred and you owe income taxes (and thus those amounts are captured in the BLS Consumer Expenditures Survey in the first table) whenever you start taking disbursements. With Roth accounts, you don’t owe taxes.

For the purposes of income, since retirement accounts are one group, we’ll treat these all as pre-tax assets, and thus the disbursements are taxable.

Stocks & Mutual Fund Shares

We do have a column for taxable brokerage holdings – “Stocks and Mutual Fund Shares” and that’s where we can find a bit more income since those disbursements are subject to short-term and long-term capital gains.

These were the median values for each age group for that assets:

  • 55 to 64 years – $58,100
  • 65 years and over – $100,000
  • 65 to 69 years – $100,000
  • 70 to 74 years – $95,000
  • 75 years and over – $120,000

If we use the 4% rule, we know that annually this will generate:

  • 55 to 64 years – $2,324
  • 65 years and over – $4,000
  • 65 to 69 years – $4,000
  • 70 to 74 years – $3,800
  • 75 years and over – $4,800

That’s not particularly impressive, especially when you consider that will be taxed too… but it gives us a little bit more to add to our annual spending.

Average Retirement Income

To compile a Frankenstein’s monster of an answer, we will use the Income After Taxes from the BLS Consumer Expenditures Survey and combine it with the 4% rule with the U.S. Census Bureau data to arrive at this table.

(for the Census data, I took the average of the 65-69 year and 70-74 year to get a 65-74 year figure to match the BLS CEX)

55 – 64 65+ 65 – 74 75+
Income After Taxes $85,573 $53,149 $59,872 $43,217
4% Rule on Taxable
Stocks & Mutual Funds
$2,324 $4,000 $3,900 $4,800
Total $87,897 $57,149 $63,772 $63,772

With the 55 – 64 age group, the median person was still working because they had a sizable value for wages. It wasn’t until you reached 65+ that wages fell and government benefits (like Social Security) started carrying more of the weight.

The general conclusion from the data seems to be that the Average Retirement Income is around the $60,000 a year mark, with government benefits being the largest contributor (at slightly less than 50%).

Average expenditures are only in the $50,000 – $55,000 range.

⭐ But the median wages & salary for someone 75+ is still over $40,000 a year. While we don’t know whether this median salary is because the retiree is forced to work or if they do it by choice, two different scenarios, but it does indicate that most retirees tend to work in retirement.

As a point of reference, the minimum wage at $7.50 for 2,000 hours is $14,500 – so the median salary is higher than a minimum wage job.

What are your thoughts on the data?

Surprising? Expected?

I found a little bit of both!

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