Tuesday , October 16 2018

Average Retirement Income 2018: How Do You Compare?

There is some good average retirement income 2018 news. According to research from Boston College, the percentage of retirees who are at risk of falling short in retirement decreased from 52 to 50 percent.

Okay…  that is not really tremendously good news. It is indeed a very modest gain. But, the small improvement at least means that things are not getting worse for retirees.

retirement income 2018Retirement income doesn’t just grow on trees… But you can make it grow!

You can jump down to see average retirement income numbers for 2018 as well as find out how to compare your income to averages in your own zip code.

However, first let’s take a look at why average retirement income 2018 is remaining relatively static.

What Gave the Small Boost to Average Retirement Income 2018?

While you might not exactly see housing prices and stocks as income, the overall growth in these assets has helped boost average retirement income, resulting in retirees being more financially secure.

Housing: Your home is most likely your most valuable financial asset and since 2013 it has probably been increasing in value. In fact, in just the last year, the average home price increase was 5.92% according to the Case-Shiller U.S. National Home Price Index.

If you intend to cash out some of your home equity, the growth in your housing wealth can help increase your retirement income.  Many retirees are opting to downsize or even pursue a reverse mortgage as a way to transform real estate wealth into retirement income.

Stocks and Other Equities:  The stock markets have seen massive gains over the last few years.  Which should mean that retirees have more assets to turn into retirement income.  If you are invested in the markets, congratulations on the growth of your assets.

However, the growth we’ve seen in the stock markets is not helping all households across all socio economic categories.  In fact, it is really only helping wealthier households.  The top third of all households own about 87% of all equities which means that most of the retirement financial gains went to households that already were not at risk.

What is the Bad News About Average Retirement Income 2018?

Besides the fact that most retirement income gains have only been felt by wealthier households, there are a few significant trends that make boosting the average retirement income 2018 (and beyond) very difficult:

Claiming Social Security too Soon:  The Full Retirement Age (FRA) for Social Security benefits has risen. However, this rise does not seem to be widely known. Most people claiming today have a FRA of 67 but the vast majority of retirees are claiming well before that age — reducing their monthly paycheck.  According to another report by the Center for Retirement Research at Boston College, the most popular age to start benefits is 62 (the earliest age possible). A full 42% of men and 48% of women start benefits at 62.

Interest Rates:  Interest rates have declined.  While this is good news if you are carrying debt, low interest rates can be bad news if you are trying to get guaranteed returns on savings.

Reverse Mortgage Rules:  In order to further strengthen the solvency of the Federal Reverse Mortgage program, the Office of Housing and Urban Development had to toughen the rules which made it harder for some households to borrow.  However, the negative impact on borrowers was somewhat offset by low interest rates.

What is the Average Retirement Income 2018  (And, Median Retirement Income 2018)?

The best data about average retirement income comes from the US Census Bureau.  The most recent data available is from 2016.

So the small gains suggested by recent research are not necessarily represented in the data below, but these numbers should be very close to reality for the average household:


SOURCE: Data is summarized from the US 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.

Notes About Median and Mean:  The table above shows both median and mean income.  Median is always lower and is probably closer to the reality for most households of retirement age.

  • Mean income — often called average income — is calculated by totaling each household’s income and then dividing by the number of of households.  This number can be deceiving.  Households earning the highest amounts of money will skew the data and make “average” incomes seem high.
  • Median income is determined by organizing all income in order from low to high and the median income is the income in the exact middle of the list with half of the incomes being higher and half lower.  Many statisticians think that median income is a more representative number.

Forget National Averages!  What is the Reality in Your Zip Code?

The national retirement income averages might be interesting, but probably not tremendously useful to you. Afterall, there are huge differences in the costs of living and income across different cities and regions in the United States.

It is more relevant to consider how your income stacks up against others in your own zip code.

You can get a quick and easy comparison by using the NewRetirement Retirement Planning Calculator. This tool is consistently rated the best online retirement calculator because it is so comprehensive and useful. This easy to use system can instantly tell you how your retirement income, expenses, assets, debt and net worth compare to other people in your own zip code.

Where Does Most Retirement Income Come From… And How Can Your Boost Yours?

What follows are the top 5 sources of retirement income for most retirees and how to boost them.

1. Average Social Security Income 2018:

More than 85% of people 65 and older get Social Security. The average Social Security income for all retired workers in 2018 will be $1,404. This is a $44 increase over last year according to a fact sheet from the Social Security Administration.

And, among elderly Social Security beneficiaries, 50% of married couples and 71% of unmarried persons receive 50% or more of their income from Social Security.

As you can see, retirees today are more dependent than ever before on Social Security income. One of the biggest problems with that approach, aside from the fact that the program isn’t incredibly stable, is that Social Security was never intended to be a primary source of income. It was only ever intended to supplement retirement income.

Boost Your Social Security Income: The best way to get more Social Security income? Postpone collecting your benefits until at least full retirement age, or longer to get the maximum monthly payment.  Delaying the start of Social Security can mean a BIG boost to your overall retirement wealth. If you wait to start benefits, you might earn an additional $300 a month — or more.

If you calculate that additional benefit over a 30 year time period, then waiting would mean $108,000 in additional retirement income.

Furthermore, if you are married, it is especially important that the higher earning spouse defers the start of benefits for as long as possible.  Learn more about smart strategies for Social Security if you are married.

Use this Social Security Calculator to figure out the best time for you to start your benefits.

2. Average Retirement Income from Assets 2018:

According to a recent report from Transamerica , “Thirty-nine percent [of baby boomers] expect their primary source of retirement income to be self-funded from accounts such as 401(k)s, 403(b)s, and IRAs or other savings.”  And, the Pension Rights Center estimates that a full 65% of retirees will rely on assets for at least some of their retirement income.

However, the estimated median for baby boomer’s total retirement savings is probably inadequate.  Transamerica also reports that baby boomers have saved a median of $164,000.  The good news is that this is a significant increase since 2007 when the median retirement savings were $75,000. The bad news is that this amount will not produce adequate income.

If you were to use a common (though flawed) rule of thumb to withdraw 4 percent each year — adjusting for inflation as you go along — then $164,000 would only produce about $6,300 in retirement income (assuming a 4% annual return) in your first year of retirement.

How to Boost: This is easy… save more!

If you are young, max out your 401(k) contributions or start an IRA, and 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 and 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!  Your savings will last a lot longer if you are spending less.  Here are 20 ways to cut retirement costs.

You may also want to explore the best way for you to turn your savings into retirement income.  Or, explore using a bucket strategy to maximize growth of some of your assets while minimizing risk on others.

3. Average Retirement Income from Pensions:

A mere 31 percent of today’s retirees have retirement income from a pension, a 6% drop over the last two years, and this number is trending further downward.  Consider yourself extremely lucky if you have this income!

The median annual pension benefit ranges between $9,262 for private pensions to $22,172 for a federal government pension and $24,592 for a railroad pension.

How to Boost: You can not exactly boost your pension payments.  However,  you can make sure that you are making the right choice between getting monthly payments vs a lump sum.  Additionally, you should periodically check with your plan administrator about the health of the funds.  Many pensions are underfunded.

4. Average Retirement Income from Work:

Work after retirement is becoming an important part of retirement income.  According to the Bureau of Labor Statistics:

  • Among 65- to 74-year-olds, labor force participation is predicted to hit 32 percent by 2022, up from 20 percent in 2002.
  • At age 75 and up, the rate will jump from 5 percent in 2002 to 11 percent in 2022.

And, other studies predict work after retirement age to be even more common.  Transamerica estimates that two-thirds of all baby boomers plan to or already are working past age 65 or do not plan to retire.

According to the AARP, the median retirement income earned by retirees from work is $25,000 a year.

How to Boost: 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 9-5.  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 and the best jobs for retirees.

Also, have you considered passive income sources?

5. Public Assistance or Veteran’s Benefits:

The Pension Rights Center reports that about 7 percent of retirees are getting help from government sources.

For those retirees getting public assistance, the median benefit ranges between $5,866 to $6,542 (depending on your exact age).

How to Boost: There are quite a few different programs that help low income seniors.

For Veteran’s benefits, consult with the Veteran’s Administration or or explore answers about veteran’s benefits.

Average Retirement Income Matters Less than What You Actually Need

Knowing about everyone’s average retirement income is interesting and one way to benchmark your future security.  However, it is much more important for you to look at the details of your own plan.

Do you know how much retirement income you will have in 2018 or throughout retirement?  Do you know how much you would like to be able to spend? 

The NewRetirement retirement calculator isn’t a magic 8-ball (although it very well seems like one) but it can give you very personalized and detailed answers and forecasts for your retirement.

It also enables you to try out any of the strategies listed above.  See what happens to your future retirement security if you add income from a retirement job, delay Social Security or tap into home equity.  This calculator makes retirement planning fun and easy.

Find ways to boost your retirement income


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