If saving for retirement is one of your primary financial goals, as it is for many people, you may be wondering how much income you’ll need to live comfortably after you retire. One way to help answer this question is to determine the average retirement income in the U.S. and then base your estimate on this.

The U.S. Census Bureau reports the average retirement income for Americans over age 65 as both a median and a mean.¹ In the most recent data from 2020, the figures were as follows:

Median retirement income: $46,360

Mean retirement income: $71,466

The difference between mean and median income

Obviously, there’s a big difference in average retirement income based on whether you’re talking about the median or the mean number. The mean retirement income is about one-third higher than the median retirement income. So, what’s the difference?

Median retirement income is calculated by listing every retirees’ income in order, from lowest to highest. The number right in the middle — with half of retirement incomes higher and half lower — would be the median.

Mean income is calculated by adding all retirement income and dividing this by the total number of U.S. retirees or households. According to statisticians, the median number is probably more representative of the actual average retirement income in the U.S. than the mean number. This is because households with higher retirement income tend to skew the mean calculation toward the high side.

Breaking down the average retirement income in 2021

Breaking down the data by retiree or household age reveals some interesting trends. In particular, the older the retiree or household, the less the average retirement income. Here are median and mean incomes for retirees in different age brackets according to the U.S. Census Bureau’s Current Population Survey (CPS) Annual Social and Economic (ASEC) Supplement.

Note that the median retirement income for households aged 60-64 is nearly twice as much as the median retirement income for households aged 75 and over.

The difference is even more stark for single retirees: According to the Pension Rights Center, half of all single Americans who are 65 years of age or over have a  retirement income of less than $27,398 per year.²

Keep in mind that these are national averages. However, the cost of living varies greatly from one area of the country to another, so the averages aren’t necessarily useful for comparison unless they’re further broken down by region. For example, a median income of $54,000 for a retired 65-year-old couple living in the rural Midwest would probably allow for a more comfortable retirement lifestyle than the same income would for the same-age couple living in a high-cost metropolitan area like New York City or San Francisco.

Where does retirement income come from?

There are four main sources of retirement income for most Americans:

1. Financial assets — These include retirement savings vehicles like IRAs, 401(k) accounts, and annuities.
2. Pension — Pension plans are benefits that guarantee employee income in retirement. While no longer popular, they are still largely used by government workers.
3. Social Security — This benefit was created in 1935. Since its inception, Social Security has been intended to supplement retirement income — not be the only source of retirement income — for most Americans.
4. Continuing employment — The idea of retirement has begun to change in recent years as many people at or near the traditional retirement age choose to continue working on a part-time basis after they “retire.”

How much retirement income will you need?

There’s no one-size-fits all answer to how much income will be sufficient in retirement. It will depend on what lifestyle you want to live and your anticipated expenses. But there are a few good “rules of thumb” to help you determine how much income you might need in retirement.

A good place to start is to figure out what sources you expect to receive income from in retirement. Social Security? Pension plan? Distributions from a 401(k) account or an IRA? Rental income? Once you identify these sources, you can start to estimate how much you think you’ll be getting from each.

Financial planners usually recommend that you should plan on needing about 80% of your pre-retirement income in retirement. This reflects the fact that you will no longer have certain expenses associated with working like commuting, purchasing work clothes, and eating out for lunch.

So, once you’ve estimated your anticipated yearly sources of income in retirement and how much you expect to get from each, see if it’s roughly 80% of your working income. That’s usually a pretty good way to estimate if you are on the right track, but, as we’ve discussed, everyone’s situation is unique, so consider consulting  a financial professional to establish a personalized plan for your retirement income.

How to boost average retirement income

Here are a few strategies to help boost average retirement income.

Consider maxing out retirement savings accounts each year. A good way to help your future self in retirement is to max out or contribute as much as you can to any tax-advantaged retirement savings accounts you have access to (like a 401(k) or an IRA).

Choose the right pension distribution option. With most pension plans, you can choose a one-time, lump-sum distribution or a monthly payment. There are several factors you should consider to determine which option will result in the most retirement income for you. These include how the pension is being funded, whether inflation adjustments are made to monthly payments, and the options for survivor benefits if you’re married.

Delay receiving Social Security benefits. You’re eligible to start receiving Social Security benefits when you turn 62 years old. However, the longer you wait to start claiming benefits, the larger your monthly benefit will be. If you start receiving benefits at age 62, this may result in a benefit reduction of up to 30%. But if you wait until age 70 to start receiving Social Security, you’ll receive the largest benefit possible.

Look into public assistance or Veteran’s Administration benefits. This assistance can help low-income retirees pay for healthcare expenses as well as help cover the cost of meals, utilities, and legal services. Visit benefitscheckup.org, which is maintained by the National Council on Aging, to search for financial assistance programs you might qualify for.³