Retirement is a stage of life that many people look forward to, but it can also be a source of stress and anxiety. Knowing how much money you'll need to retire comfortably is essential for planning this stage of life. Generally speaking, most experts agree that you'll need between 70 and 80% of your pre-retirement income to maintain your standard of living in retirement. Understanding 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 retirement.
The COVID-19 pandemic has caused many Americans to take a closer look at their long-term financial goals, including retirement planning. Reviewing your average retirement income can give you an idea of where to start preparing. The median and average numbers weigh differently when considering which is most relevant to retirement planning. 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.
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 have saved? How much money do you need to live comfortably? What sources of income will you have during retirement? Statistically speaking, your income slowly decreases as you age due to several factors, such as not earning money and taking into account longer life expectancy, health care costs, long-term care, and more. 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. The five states with the highest retirement income range 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. 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 the diversification of your portfolio. This can help alleviate market risks and protect your current or future revenues. Social Security pays a portion of your retirement income with money collected from taxes on payments made by employers and employees.
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. 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 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. A good monthly retirement income is enough to keep your standard of living comparable to what you had before leaving your career.
A good rule of thumb is to save enough money so that it replaces about 80% of your pre-retirement monthly income. The most important factor in determining how much money you need for retirement is whether or not you'll have enough money to generate an adequate monthly income.