As you save money for your future, have you ever projected what your monthly “paycheck” will be in retirement? Securing a comfortable retirement is a priority for most Americans, particularly for those in their 50s and over. The amount you’ll have each month is an important number in your overall financial plan.
So, what is a good monthly retirement income?
It may be surprising, but ideally, your monthly income in retirement won’t be significantly less than what it during your working years. Sure, you may trim some expenses like your mortgage, commuting costs, or kids’ college fund. But you may want to spend more on things like travel and healthcare.
When it comes to a good monthly retirement income, financial advisors typically recommend a monthly income equal to 80% of pre-retirement income.
According the U.S. Census Bureau, in 2021 the median income for households headed by someone over 65 was $50,290.1 That’s a monthly paycheck of $4,191 before taxes.
But many of our clients earn more than that during their working years.
Let’s say your current take-home salary is $100,000. 80% of that would be $80,000, which is around $6,600/month. Take a look at some typical expenses of a retiree below to see how that could look in your monthly budget:
Keep in mind your budget will probably differ in some or several areas. So, would a monthly retirement income of $6,600 be good for you, or not?
Next, what makes up your monthly retirement income? Let’s take a look. . .
Three Primary Sources of Monthly Retirement Income
As you approach retirement, it’s crucial to understand the different sources of monthly income that will support your lifestyle. Here are four primary sources of retirement income:
Social Security benefits
This government program provides financial benefit to retirees. Your earnings history and the age you begin receiving benefits influence the amount you receive.
Pension plans
Even today, some employees still benefit from pension plans provided by their employers. These plans usually offer a fixed monthly income during retirement, based on your length of service and salary history.
Investments and savings
Establishing a solid investment portfolio and saving diligently can create stable income streams during retirement. Assets such as stocks, bonds, mutual funds, and property can yield regular returns to supplement your other income sources.
Diversifying your investment portfolio allows you to spread risks and optimize potential gains.
Strategies to Enhance Your Monthly Retirement Income
When planning for the future, securing a strong monthly income is vital to maintain financial stability and fully enjoy your lifestyle in retirement. In this part, we will explore three effective strategies to enhance your monthly retirement income: maximizing Social Security benefits, optimizing investment returns, and considering part-time job opportunities.
Maximizing Social Security Benefits: Social Security can play a crucial role in your retirement income. To get the most out of your benefits, consider delaying your claim until your full retirement age or even beyond. This can lead to higher monthly payments. Plus, if you have a spouse, you may be eligible for spousal benefits or survivor benefits, further increasing your monthly income.
Optimizing Investment Returns and Taxes: Wise investing can help increase your retirement income. Diversify not only your investment portfolio – but also your tax situation – to spread risk and that align your tolerance with your overall financial goals. Meeting with a financial advisor is critical for strategizing your monthly retirement income.
Considering Annuities: Annuities aren’t right for everyone, but they can give confidence to certain types of investors. If you have an income gap or a lump sum of money you want evenly spread throughout your retirement, speak to an experienced financial advisor about which type of annuity could potentially benefit you.
Considering Part-Time Job Opportunities: Many retirees opt to continue working part-time during retirement for various reasons. Not only can it provide an additional income source, but it also keeps you mentally and socially active. Seek part-time job opportunities that match up with your skills, interests, and desired level of commitment. This could include consulting, freelancing, or even pursuing a passion project that can generate income.
By implementing these strategies, you can enhance your monthly retirement income and enjoy more financial stability in retirement. Remember, careful planning and informed decision-making are key to achieving your retirement goals.
If you don’t have a financial advisor, or would like to get a complimentary second opinion of your current financial plan, get in touch with our firm.
We specialize in covering the five areas of retirement planning: financial planning, wealth management, healthcare, taxes, and legacy. Whether your questions are in regards to monthly retirement income or anything else in your retirement plan, you deserve the clarity and confidence. We’re here to help!
