Editor’s Note: This story originally appeared on NewRetirement.
How are you going to pay for retirement? How is everyone else doing it?
What is the average retirement income for 2022? Has it changed a lot from past years as we emerge from the pandemic? Are you anywhere close to average?
2021 held mixed financial results for different households. Lower spending, a strong stock market, and surging home equity produced an increase in savings for many, especially for the wealthiest.
In fact, the net wealth of the top 1% richest households rose by nearly 35 percentage points compared to a modest 5% increase for households in the bottom 50%.
And, all that bodes well for future retirement income.
But, where do you stand now, and how does that impact your future retirement? Were you able to save more? Can you translate that into greater retirement income?
Figuring out if you are going to have a secure future can be difficult. There are a lot of questions to answer and some things can be estimated by comparing yourself to averages.
However, there is no way you are average. When reviewing the numbers that follow, remember that your retirement security is based on hundreds of different factors. The best way to plan and feel good about your future is by creating a detailed retirement plan.
Average Retirement Income and the Risk of Running Out of Money
The Boston College Center for Retirement Research publishes the National Retirement Risk Index (NRRI). It measures the share of American households that are at risk of being unable to maintain their pre-retirement standard of living in retirement. The index is updated each year.
According to their most recent analysis, the percentage of retirees in 2021 who are at risk of not having enough is about 50%.
The most recent analysis uses data from 2019, but because the economy has changed dramatically over the last year, the researchers have attempted to determine the impacts of job losses and also growth in the financial and housing markets.
Their conclusion? “The bottom line is that half of today’s households will not have enough retirement income to maintain their pre-retirement standard of living, even if they work to age 65 and annuitize all their financial assets, including the receipts from a reverse mortgage on their homes.”
Continue reading to see average projected retirement income numbers for 2022. Or, use the NewRetirement Planner to calculate your own retirement income, assess if it is enough, and learn about moves to make now so you can feel great about your financial future.
Differences Between Mean and Median
The numbers you will review below represent both mean (average) and median income. Median income is closer to the reality for most households of retirement age.
Here are the differences:
Mean Retirement Income
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.
In fact, mean (average) is particularly meaningless in 2022. Wealthy households have largely gotten wealthier over the last year. And, poor households have mostly simply held on. Many of the lowest-earning households went from low wages to no job or income at all.
Median Retirement Income
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 being lower. Many statisticians think that median income is a more representative number.
Median is probably more representative now with increasingly divergent income levels.
What Are the Average and Median Retirement Incomes for 2022?
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. However, for these purposes, we’ll start with statistics for those over 65.
The average retirement income numbers for Americans over 65 seen below come from the US Census Bureau. The most recent data available is from 2020 and compiled in 2021. So, all of the economic changes we have seen over the last year are not necessarily represented in the data below.
The average retirement income has dropped. Despite weathering the pandemic, retirees have less retirement income now than the previous year. It remains to be seen if this is a temporary reflection of reduced spending or the reality.
The following uses the latest available data:
- Median Income – $46,360 (down from $56,632 in 2019)
- Mean Income – $71,446 (down from $84,153 in 2019)
Average Retirement Income 2022 by Household Age
Both the mean and median retirement income numbers above might seem “above average” — relatively healthy. However, these numbers don’t tell the whole story. Nor do they reflect the “retirement crisis” that is so often reported.
And, there is a reason. Those numbers don’t show the reality of all retirees — especially those who are older.
You see, for most people, retirement income falls dramatically as you age. The median household income for households older than 75 is just over half that of the income for households ages 60-64!
Compare the median income by age range:
|Age of Household||| Median Income||| Mean Income|
|Households Aged 45–49||$91,113||$121,301|
|Households Aged 50–54||$89,389||$125,837|
|Households Aged 55–59||$82,430||$116,191|
|Households Aged 60–64||$66,803||$96,996|
|Households Aged 65–69||$57,992||$87,920|
|Households Aged 70–74||$50,231||$74,139|
|Households Aged 75 and Older||$36,925||$57,550|
Data is summarized from the U.S. 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.
Much Worse Retirement Income for Single Female Households
Declining average retirement income as people age is not the worst of it!
The averages are more distressing for people who are single, especially women. The Pension Rights Center reports that “Half of all Americans age 65 or older have incomes of less than around $25,000 a year — far less than the amount that most need to meet their day-to-day living and health care expenses.”
The census data shows this for non-family (single) female households:
|Age of Household||| Median Income||| Mean Income|
|Households Aged 65-69||$28,311||$39,945|
|Households Aged 70-74||$26,558||$37,159|
|Households Aged 75 and Older:||$21,666||$32,233|
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.
The average monthly Social Security income got a 5.9% boost for 2022 due to rising inflation. This cost of living adjustment (COLA) raised the average monthly Social Security payment to $1,657.
Social Security was never intended to be a primary source of income. It was only ever intended to supplement retirement income. However, maximizing your payout can really add up over your lifetime!
How to Increase Your Social Security Income
What is the best way to get more Social Security income?
Postpone collecting your benefits until at least full retirement age or longer (age 70) to get the maximum monthly payment. Delaying the start of Social Security can mean a BIG boost to your overall retirement wealth.
And, more and more retirees are getting the message. It used to be that the most popular age to start benefits was 62. However, now the most popular age for men to start benefits is 66 with 36% starting benefits at that age, followed closely by age 62 with 27% starting at this early age.
The most popular age for women to start is a tie. Thirty-one percent of women start at 62 and another 31% start at 66.
If you are married, it is probably a good idea for the higher-earning spouse to defer the start of benefits for as long as possible. As you saw above, retirement income for people living on their own is extremely low.
You can help mitigate that problem with the right claiming strategy. Learn more about smart strategies for Social Security if you are married.
Average Retirement Income From Assets for 2022
According to the most recent Transamerica Retirement Survey, 62% of high-earning (earning more than $100,000) workers expect their primary source of retirement income to come from retirement accounts such as 401(k)s, 403(b)s, and IRAs or other savings.
And, the Pension Rights Center reports similar estimates. However, they have found that most older adults have little in savings. Only 66% receive income from financial assets. Half of those receive less than $1,754 a year.
Most people don’t have enough assets to meet their needs. The estimated median for a baby boomer’s total retirement savings is inadequate to provide the income needed. Transamerica reports that baby boomers have saved a median of only $164,000.
If you were to use a common (though flawed) rule of thumb to withdraw 4% each year — adjusting for inflation as you go along — then $164,000 would only produce about $6,560 in retirement income in your first year of retirement. This is not enough for most households.
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 and 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 or work longer! Your savings will last a lot longer if you are spending less.
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.
Working with a financial adviser to identify opportunities to efficiently turn assets into income can be another good opportunity for you. NewRetirement Advisors is a new, cost-effective, and comfortable way to work with a Certified Financial Planner.
Or, model different scenarios using the NewRetirement Planner to find a set of inputs and opportunities that give you a secure future.
Average Retirement Income From Pensions
The Pension Rights Center reports that 1 out of 3 older adults have retirement income from a pension. This number continues to trend 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 state or local pension, $30,061 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 versus a lump sum. Additionally, you should periodically check with your plan administrator about the health of the funds. Many pensions are underfunded.
If you are lucky enough to have a pension, be sure to use a retirement calculator with pension controls to accurately factor your pension into your overall plan!
Average Retirement Income From Work
Work after retirement is becoming an important part of retirement income.
Before the pandemic, the Bureau of Labor Statistics reported that increasing numbers of people over 65 and even over 75 would be remaining in the workforce. And, a report from the Transamerica Center for Retirement Studies study found that more than half of workers (57%) plan to work in retirement, either on a full-time (20%) or part-time (37%) basis.
And, 81% of those boomers cite financial reasons — the need for retirement income — for continuing to work.
However, this research contradicts the headlines reporting on “the great resignation,” massive numbers of people retiring. And, in fact, Pew Research reports that half of everyone over 55 is now out of the labor force due to retirement.
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 a 9-to-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. Also, have you considered passive income sources?
Use the NewRetirement Planner to see how work income impacts your long-term financial health. Try different scenarios with different levels of work income over varying time periods to discover your optimal plan.
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