As we all know, retirement is a stage of life that requires careful planning and preparation. Research by the Federal Reserve has found that the average retirement account balance in the United States is $95,776. Knowing the average retirement income in the United States can help you see how it compares to the national average and give you a reference when planning for this stage of life. Do you know how you're going to pay for retirement? Or how much money you'll need to live comfortably in those years? According to a three-part survey conducted by CNBC, more than 70 percent of Americans received a serious financial wake-up call during the COVID-19 pandemic. Because of this, many are now paying more attention to their long-term financial goals and advances, including retirement planning.
Reviewing your average retirement income can give you an idea of where to start preparing. After reviewing the numbers, you can also assess the state of your finances and whether they need a thorough check. The median and average numbers weigh differently when considering which is most relevant to retirement planning. Let's take a look at what each one actually represents. The median number refers to the number located exactly in the center of a set.
If I found the median income of 13 retirees, I would organize the values from lowest to highest. Any number that falls into seventh place is the median retirement income within this group of retirees. Because retirees with higher incomes tend to skew the median retirement income, the median income is a more accurate measure of the national average. To get a more accurate idea of what a good retirement income looks like for you, start by determining your answers to the following questions: How much money do you need to live comfortably? How much money do you have saved? How much money do you expect to receive from Social Security? Statistically speaking, your income slowly decreases as you age, as shown in the table below. This is due to several factors, one of which is that most people don't earn money during this period, but instead spend their life savings. Another predominant factor in declining retirement income is the long list of retirement risks that are not taken into account when planning this stage of life.
This includes taking into account longer life expectancy, health care costs, long-term care, and more. So, while it makes sense for your income to decline slowly if you're not earning money, you'll likely need more money as you age and your health worsens. This is something to consider when you start withdrawing retirement funds and when making plans for your retirement years. The Census Bureau shows the average retirement income in each state. We have listed the averages for each state based on region.
To get a better view of retirement income in the United States, let's take a look at five states with the highest median incomes for retirees. The five states with the highest retirement income range from 54 percent above the average to approximately 17 percent above. The District of Columbia has the highest median income for retirees, 54 percent above the average. Many people have a variety of sources of retirement income. These may include investment accounts to protect against inflation, benefits from government programs, or ongoing paychecks. Generally speaking, 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. This can help alleviate market risks and protect your current or future revenues. Every time someone receives a payment, a Social Security tax of 6.2 percent of the gross amount is withdrawn. For the self-employed, this percentage doubles to 12.4 percent. Social Security then pays a portion of your retirement income with this money.
The amount you receive is based on what you earned during your working years. The amount you receive 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. Working for at least 35 years will guarantee you a slightly higher pay. 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. If this is the case for your situation, learn about ways to protect your assets against inflation. You can do this by depositing your earnings into a retirement account or by 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. Our free tool can help you find an advisor that fits your needs and look for one that fits your unique criteria. Once matched with an advisor, consult for free without obligation. Many Americans spend their lives working hard with one goal in mind: having enough money saved up so they can retire comfortably and enjoy their golden years without worrying about finances.