As a strategic partner who helps clients navigate and grow in changing circumstances, Tina is responsible for the direct management of the Citizens Wealth Management financial planning and estate planning team, including a team of CERTIFIED FINANCIAL PLANNERS™, estate and tax planners, and trust officers.
Most people look forward to their retirement, dreaming of a lifestyle in which they have the freedom to spend their days as they wish and answer to no one. But how much do you need to retire? Figuring out when to retire requires a careful look at your current salary, investments, how you plan to live in retirement, and other things.
Ready to retire but not sure if your savings will cut it? Let’s break it down!
Have you been stashing away cash for years, but still wonder if it’ll be enough when you finally hang up your work boots? You’re not alone! The question of “what is a good annual retirement income” keeps many Americans up at night As someone who’s spent countless hours researching this topic, I’m excited to share what I’ve learned to help you determine if your retirement nest egg is on track
The truth is there’s no magic number that works for everyone. Your perfect retirement income depends on several factors unique to you—where you live, your health and the lifestyle you want to enjoy. But don’t worry! I’ve got some solid guidelines to help you figure out what’s right for YOU.
The Current State of Retirement Income in America
Before we dive into what you should aim for, let’s look at where most Americans stand today:
According to the United States Census Bureau, as of 2025, the average retirement income for individuals 65 and older looks like this:
| Age Group | Median Annual Income | Mean Annual Income |
|---|---|---|
| 65+ years | $47,620 | $75,254 |
| 65-74 years | $55,747 | $84,975 |
| 75+ years | $38,239 | $61,547 |
Notice something interesting? The median income is a lot less than the mean income. The median income is the point where half of the people earn more and half earn less. The average goes up because of some retirees with very high incomes. That’s why the median is often seen as a more accurate measure for most Americans.
The Bureau of Labor Statistics looked at how people spend their money and found that U S. People aged 65 and up who lived in their own homes spent an average of $64,326 in 2023. But here’s the kicker: an survey by the Employee Benefit Research Institute found that 2068% of retirees actually spend less than $40,000 a year!
The Famous “80% Rule”—Is It Right for You?
You’ve probably heard financial experts suggest that you need about 80% of your pre-retirement income to maintain your lifestyle after retiring. Ashley Weeks, vice president of wealth strategies for TD Wealth, confirms this rule of thumb but adds that it’s “a pretty broad stroke.”
Why 80% and not 100%? Well, some expenses typically decrease after retirement:
- No more commuting costs
- Work clothes become optional (hello, pajama days!)
- Lunches out with colleagues disappear
- You’re not actively saving for retirement anymore
- Taxes might be lower
But let’s be real—other expenses might increase:
- Healthcare (a big one!)
- Travel and leisure activities
- Hobbies you now have time for
- Possibly helping family members
A financial advisor named Joe Conroy says it best: “You can have a great retirement on $5,000 a month or $50,000 a month.” ” It really depends on YOU.
How Geography Impacts Your Retirement Needs
Where you call home during retirement can dramatically impact how far your dollars stretch. According to a 2023 GOBankingRates analysis, the annual cost to retire comfortably varies by as much as $66,000 between states!
Hawaii is the most expensive state; a comfortable retirement would cost a whopping $121,228 a year there. Mississippi, on the other hand, is the least expensive at only $55,074 per year.
Here’s a snapshot of annual retirement costs in selected states:
| State | Annual Retirement Cost |
|---|---|
| Hawaii | $121,228 |
| California | $90,399 |
| Florida | $68,109 |
| Texas | $60,353 |
| Mississippi | $55,074 |
These figures include basic expenses like food, shelter, transportation, healthcare, and utilities, plus a 20% “comfort buffer.”
So if you’re struggling to hit your retirement savings goals, maybe consider retiring to a lower-cost state? Just sayin’!
Breaking Down Your Retirement Income Sources
Most retirees don’t rely on just one income stream. Instead, they piece together various sources to create their total income. Understanding these sources can help you plan better:
1. Social Security
Almost 90% of Americans 65 and older receive Social Security benefits. As of December 2024, the average monthly benefit for retired workers is $1,975, which equals $23,700 annually. Not enough to live on for most people, but it’s a solid foundation to build upon.
Social Security represents about a third of the income received by people older than 65, making it a crucial piece of most retirement puzzles.
2. Retirement Accounts
Your 401(k), IRA, or other retirement accounts will likely provide a significant portion of your income. The conventional wisdom suggests withdrawing about 4% of your savings annually to avoid running out of money.
With this rule, a $1 million nest egg would generate about $40,000 per year. But as Nick Hughes, a certified financial planner, points out, “The problem is that the 4% rule doesn’t really account for taxes.”
The Vanguard study on retirement savings shows where the average American stands:
| Age Range | Average Balance | Median Balance |
|---|---|---|
| 55-64 | $256,244 | $89,716 |
| 65+ | $279,997 | $87,725 |
3. Pensions
Traditional pensions are becoming rare, but if you’re lucky enough to have one, it can provide reliable monthly income. Government employees, teachers, and those in certain industries are more likely to receive pension benefits.
4. Part-Time Work
Many retirees choose to work part-time, both for income and fulfillment. In fact, 62% of working Americans plan to continue working during retirement in some capacity, according to a recent Schroders study.
But be careful about relying too heavily on this option. As Ashley Weeks cautions, “Most folks just assume ‘I can use part-time work as a stop-gap.’ At some point, we all won’t physically be able to go to work.”
5. Annuities
Annuities can provide guaranteed income for life, which many retirees find comforting. They’re essentially a contract with an insurance company where you pay a lump sum in exchange for regular payments.
So What IS a Good Annual Retirement Income?
After all this, you’re probably still wondering: what’s the actual number I should aim for?
Let me break it down into three tiers based on what I’ve learned:
Basic Comfort: $40,000-$60,000 annually
At this level, you can cover basic needs and some modest luxuries in most parts of the country (except high-cost areas like Hawaii or California). This works well if:
- You’ve paid off your mortgage
- You live in a low-to-moderate cost area
- You have good health insurance coverage
- You enjoy simple pleasures and don’t travel extensively
Middle Comfort: $60,000-$90,000 annually
This range provides more flexibility and comfort for most retirees across the country. You can:
- Travel regularly
- Pursue hobbies that cost money
- Help family occasionally
- Handle unexpected expenses more easily
- Live in moderately expensive areas
High Comfort: $90,000+ annually
This level allows for few financial constraints in most parts of the country. You can:
- Travel extensively, including international trips
- Live in expensive areas
- Help family members financially
- Pursue expensive hobbies
- Handle medical expenses with less stress
Remember that these are generalizations! Your personal situation might require adjustments up or down.
Practical Steps to Determine YOUR Number
So how do you figure out what’s right for YOU? Here’s my simple process:
-
Track your current spending for at least 3 months. This gives you a baseline.
-
Adjust for retirement changes:
- Subtract work-related expenses
- Add more for healthcare (many experts suggest budgeting $300,000 for a couple’s healthcare in retirement)
- Add more for hobbies/travel if that’s in your plans
- Subtract mortgage payments if you’ll have paid off your home
-
Multiply your monthly need by 12 to get your annual requirement.
-
Apply the “4% rule” to see how much you need saved:
- Annual income needed ÷ 0.04 = Approximate savings required
- Example: $60,000 ÷ 0.04 = $1,500,000 needed
-
Factor in Social Security by creating a my Social Security account at ssa.gov to get your estimated benefit, then subtract this from your needed income.
-
Adjust for your location using the state-by-state cost data we discussed earlier.
Common Retirement Income Mistakes to Avoid
In my research, I’ve noticed these common mistakes people make when planning their retirement income:
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Underestimating longevity – People are living longer! Plan for 30+ years in retirement if you retire at 65.
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Forgetting about inflation – What costs $50,000 today might cost $67,000 in 10 years with just 3% inflation.
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Ignoring tax implications – As Christopher Abts, a financial advisor, notes, “How you take income in retirement will absolutely have an impact on the taxes you pay.” Traditional 401(k) and IRA withdrawals are taxable!
-
Not planning for healthcare costs – Medicare doesn’t cover everything, and long-term care costs can be devastating without proper planning.
-
Being too conservative with investments – While protection is important, being too conservative can mean your money doesn’t grow enough to last.
Final Thoughts: Your Retirement, Your Number
There’s no one-size-fits-all answer to what makes a good retirement income. The most important thing is that YOUR income supports the retirement lifestyle YOU want.
Christopher Abts sums it up nicely: “No one wants to retire to a lower lifestyle.” Your goal should be maintaining the quality of life you desire, whatever that means to you.
I believe the best approach is to work with a financial advisor who can help you create a personalized plan. As Abts says, “My hope is that they seek professional guidance before they pull the trigger.”
Remember, retirement planning isn’t just about a number—it’s about creating the freedom to enjoy the life you’ve worked so hard to build!
What’s your retirement income goal? Have you started planning yet? I’d love to hear your thoughts in the comments!
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Always consult with a qualified financial professional before making important financial decisions.
How much do you plan to spend in retirement?
Its important to determine your post-retirement spending based on your expected lifestyle. What will you do in retirement? For example, traveling the world would likely cost more than spending most of your time with your grandchildren. Some people retire from their primary careers and then embark on post-retirement careers to supplement their incomes.
Using an online retirement calculator
Depending on how these variables look in your situation, it might mean the guidelines wont work for you. But in addition to consulting with financial professionals, you can use an online retirement planning calculator to get a reasonable idea of whether you are on track to be where you want to be.
Retirement calculators can help you figure out how much you need to save for retirement based on how much money you make, when you want to retire, how much you have saved, and even how much you think you’ll spend after work. They give you the flexibility to create scenarios, so you can set realistic expectations. Here are two scenarios to help illustrate how they work:
The following scenarios are for illustration purposes only and not representative of actual people or outcomes.
Monica, age 40, aims to retire at 62 and currently earns a salary of $125,000 per year, of which she consistently sets 15% aside for retirement. As a result of planning for retirement since she began working, she has accumulated $450,000. She estimates she will spend 90% of her final working years salary while retired.
The retirement calculator we used made assumptions about Monica’s average annual raises (2%), her investment performance before and after retirement (7% and 4%, respectively), inflation (2%), and the length of her retirement (25% years). It then estimated that Monica could retire in 2062, and at age 87, she would still have about $581,000. That means she should have enough money to get through her 90s if she is lucky enough to live that long.
Steve is 30, earns $80,000 per year and has followed the suggestion of accumulating $80,000 for retirement to date. He has made similar assumptions as Monica, except he defers 10% per year for retirement, wants to retire at 65 and thinks hell spend 100% of his final years salary while retired
Unlike Monica, however, Steves current salary and deferral rate take him to age 87 before he runs out of retirement assets. Since Steve is planning on a retirement length of 25 years, taking him to 90, hell need to change his plan if he wants to get there with some funds left over.
So how much money do you need to save for retirement? Its a question that requires a fair amount of introspection and analysis. You can use any of the common suggestions of income multipliers or percentages to guide you, but youll likely feel you have more certainty if you ask yourself key questions about what you envision for retirement and then set clear goals. With a defined target, youll know better what youll need get you there.
Navigating retirement can be complex, but you dont have to do it alone. If youre looking for professional guidance, consider speaking with a Citizens Wealth Advisor* to create a personalized retirement plan. The right plan today can provide financial confidence for decades to come so you can enjoy your retirement to the fullest.
What is a Good Monthly Retirement Income?
FAQ
What is a good annual income for a retired person?
The number doesn’t matter, but the general rule of thumb is that you want to be able to replace about 80% of your working income when you retire. So, if you’re making $70K when you retire, you want a minimum of $56K of income during retirement.
What is a reasonable monthly retirement income?
A “good” monthly retirement income varies significantly, but a common benchmark is 70–80% of your pre-retirement income to maintain your lifestyle. For 2025, U. S. Census Bureau data shows the average retirement income for an individual is about $5,000 per month, and for a couple, it is around $8,300 per month, though median incomes are lower.
Can a retired couple live on $60,000 a year?
A retired couple might be able to live on $60,000 a year, but it depends on where they live, how much healthcare costs, how they live, and how much debt they have. This income is possible because the person has a paid-off home, little debt, and spends wisely on things like food and transportation.
Is $80,000 a good retirement income?
The amount of money you need in retirement can vary based on your lifestyle, expenses, location, and whether you are single or married. $80,000 may be enough for some people.
What is the average retirement income for a 65 year old?
The average retirement income for individuals 65 and older in the US is $75,254, according to the United States Census Bureau. Understanding this can help you better establish a baseline target. Annuities can help protect your savings from market volatility and guarantee income for life. Do you know how you’ll fund your retirement?
How much does a retiree make a year?
Retirement income varies considerably based on region. In some states, you might receive generous retirement incomes, while in others, you can expect payments below the annual national average of $27,617. For instance, the District of Columbia has the highest average retirement income at $43,080 per year.
What is the average retirement income?
Featured in top publications and honored by Investopedia and People Magazine. The average retirement income for individuals 65 and older in the US is $75,254, according to the United States Census Bureau. Understanding this can help you better establish a baseline target.
What is a good retirement income?
“You can have a great retirement on $5,000 a month, and you can have a great retirement on $50,000 a month,” says Joe Conroy, financial advisor and owner of Harford Retirement Planners in Bel Air, Maryland. However, before you retire, understand what defines a good retirement income for you and where that money will come from.
How much retirement income do you need?
If you’re wondering how much retirement income you need, you’re not alone. Most people wrestle with this question, especially those that lack financial experience, literacy or familiarity with the retirement planning process. Generally, a good retirement income is about 75% to 85% of the pre-tax income earned in your last working year.
How much money does a single person need to retire?
Our baseline scenario calculation tells us that a typical single person needs to generate about $1,810 in additional monthly retirement income (non-Social-Security) to meet the U.S. average retirement income. The annual amount is $21,720. Adding a bit of wiggle room brings us to $2,000 per month or $24,000 per year.