Can You Get By on the Average Retirement Income?

Senior couple working in living room, with laptop on coffee table

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One thing we all have in common when it comes to retirement is the desire to be financially secure. We want to be able to relax and enjoy our lives after having spent decades in the workforce. But how do you know if you’ll have enough money to get by? How can you be sure that you've saved enough?

Financial planners often suggest that you aim to replace about 80% of your pre-retirement income. But the actual amount you'll need will depend on your standard of living, your life goals, and whether you're still paying off debt. An amount of income in line with the U.S. average could do the trick, or you might have to work and save more to meet your lifestyle goals.

Average Retirement Income in America

According to the U.S. Bureau of Labor Statistics, the average pretax income for a household headed by someone age 65 through 74 was $65,943 in 2019, the latest year for which this data is available. But income tends to fall a great deal as individuals grow older and move further into retirement. Average pretax income was just $41,937 for households headed by someone age 75 or older.

The average American should receive retirement income from three main sources to reach “ideal” financial security, according to the National Institute on Retirement Security (NIRS): Social Security, a defined benefit pension plan, and a defined contribution account. But an NIRS report shows that just 6.8% of Americans receive income from all three sources, while 40.2% receive income only from Social Security.


Additional sources of income can include part-time work, side hustles, and less common sources like inheritances.

The estimated average monthly Social Security benefit was $1,543 as of January 2021, or $18,516 annually after accounting for the 1.3% cost of living adjustment that will add $20 to the average check. 

The way in which companies offer retirement security has also changed, according to data from insurer Willis Towers Watson. New hires are less likely to receive income from a traditional pension. Just 14% of companies on the Fortune 500 list offered a pension plan to new hires as of 2019, down from 59% in 1998. Fortune 500 companies that offered only a defined contribution plan, such as a 401(k) plan, more than doubled, from 41% to 86% over the same time frame.

Typical Living Expenses in Retirement

The average annual spending for a household led by someone age 65 or older is $50,220. But just as with income, spending is much lower for older retirees. Households led by someone between the ages of 65 and 74 had average spending of $55,087 in 2019, compared to average spending of $43,623 when the householder was age 75 or older.

Perhaps the largest cost seniors should prepare for is health care. Fidelity estimates that a 65-year-old couple will need an average of $300,000 for health care costs in retirement. That estimated cost was associated only with Medicare and didn’t account for expenses related to dental, assisted living, or long-term care. 


Health care costs will likely make up a large portion of spending in retirement, so retirees should budget about 15% of pre-tax income for medical expenses.

Other kinds of expenses tend to decrease during retirement. Housing costs can be cheaper for seniors if they've paid off their mortgage, downsized, or moved to a lower-cost area. And transportation costs are less if they used to commute to work every day.

Expenses like food, entertainment, and travel may go up or down, depending on whether they'll be eating out more often, and seeing places and doing things they may not have had time for when they were younger and working.

How Do You Set a Retirement Budget?

The actual amount of income you’ll need depends on your standard of living, or the degree of wealth and comfort available to you. You may be able to get by on a good deal less than 80% of your pre-retirement income if you can survive without a car and you don’t dine out often or pursue expensive hobbies. You may need to replace more if you want to travel, contribute to charity, or gift money to children or grandchildren.

A standard rule of thumb is to use the 80% point as a guide, then factor in income, lifestyle, and health expectations to modify your budget. You can estimate your costs using a retirement planning spreadsheet.

How Do You Prevent a Shortfall?

The sooner you start thinking about your retirement goals, the easier it will be to create income sources to meet your needs. It’s best to take advantage of your company’s 401(k) match if it offers one and you're still years away from retirement. Try to max out your traditional or Roth IRA contributions if you don’t have access to an employer-sponsored retirement account or you have extra money to invest.


Learning how to make a budget that fits your lifestyle can pay off by lowering your expenses over time no matter what stage of life you're in.

Try to take advantage of catch-up contributions from the IRS if you’re approaching retirement with a shortfall and you're at least 50 years of age. In 2021 and 2022, you can contribute:

  • Up to $6,500 to your 401(k) 
  • Up to $1,000 to your IRA
  • Up to $3,000 to your SIMPLE IRA, if applicable

You may consider claiming Social Security later in life, rather than when you’re first eligible at age 62. Claiming Social Security at 70 years old can result in a monthly check that’s 77% more than the benefit you would have gotten if you had started receiving benefits at 62—a difference of $545 each month.

Saving pre-tax money in a health savings account while you’re still working can be a good way to save for those inevitable medical expenses in retirement. Downsizing your home or taking on side hustles are also something to think about.

Plan for Your Future

Investing for your future early always pays off because you get to take advantage of compound interest and you'll feel more financially secure from a young age. But there are ways to generate more retirement income even if you're getting a late start. Using catch-up contributions, delaying Social Security, and working part-time may all be good options to increase your retirement income above the average.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. U.S. Bureau of Labor Statistics. "Table 1300. Age of Reference Person: Annual Expenditure Means, Shares, Standard Errors, and Coefficients of Variation, Consumer Expenditure Survey, 2019," Page 1.

  2. National Institute on Retirement Security. "Examining the Nest Egg: The Sources of Retirement Income for Older Americans," Page 6.

  3. Social Security Administration. "2021 Social Security Changes," Page 2.

  4. Willis Towers Watson. "Retirement Offerings in the Fortune 500: 1998–2019."

  5. Fidelity. "How Much Will You Spend in Retirement?"

  6. Internal Revenue Service. "Retirement Topics—IRA Contribution Limits."

  7. Internal Revenue Service. "2022 Limitations Adjusted as Provided in Section 415(d), Etc," Page 2.

  8. Social Security Administration. "When to Start Receiving Retirement Benefits."

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