Retirement planning is a crucial part of financial planning, yet many 20-year-old Americans start their careers with entry-level paychecks and don't think about it. As 30-year-olds, they are often busy with costly milestones such as buying a home and starting a family, and may still be paying off student loans. Knowing the average retirement income in the United States can help you compare it to the national average and plan for your retirement years. The median and average numbers are two different ways to measure retirement income.
The median number refers to the number located exactly in the center of a set, while the average number is the sum of all values divided by the number of values. The median income is a more accurate measure of the national average, as retirees with higher incomes tend to skew the median retirement income. Statistically speaking, your income slowly decreases as you age, due to several factors such as not earning money during this period and taking into account longer life expectancy, health care costs, long-term care, and more. The Census Bureau shows the average retirement income in each state, ranging from 54 percent above the average to approximately 17 percent above.
Many people have a variety of sources of retirement income, such as investment accounts to protect against inflation, benefits from government programs, or ongoing paychecks. It's best to have several of these sources of income to ensure you have enough to live comfortably. When considering where your retirement income will come from, an important aspect to consider is diversifying your portfolio to alleviate market risks and protect your current or future revenues. Social Security pays a portion of your retirement income with money collected from taxes.
The amount you receive is based on what you earned during your working years and is based on the 35 years you earned the most. If you don't work 35 full years, zeros will be counted, reducing your monthly benefit. According to the Transamerica Center for Retirement Studies, 48 percent of U. S. workers expect their primary form of retirement income to come from their personal financial assets.
To protect against inflation, consider depositing your earnings into a retirement account or annualizing your funds. Knowing your average retirement income can help you assess how healthy your finances are and whether you need to reevaluate your plans. It can also help you determine solid goals for your retirement savings and approximately how much you'll want to distribute on a regular basis. Once you know how much to distribute, you can focus on how you're going to do it, whether it's buying an annuity, implementing the deposit method, or following another system. If you're not sure what's best for you, talk to a trusted financial advisor who can help you develop a plan.