What is a good monthly retirement income?

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An average monthly retirement income of 80% is a good range. Advisors recommend a range between 70% to 90%. According to the U.S. Census Bureau, the median income of households headed by someone older than 65 years old was $47620 or $3,968 per monthly. [0] . Many people want to increase their monthly retirement income. […]


An average monthly retirement income of 80% is a good range. Advisors recommend a range between 70% to 90%. According to the U.S. Census Bureau, the median income of households headed by someone older than 65 years old was $47620 or $3,968 per monthly.


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Many people want to increase their monthly retirement income. The U.S. Bureau of Labor Statistics reported that 65-year-olds spent on average $52,141 per year, or $4.345 per month. This was higher than the median income of 65-and-over households.


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These are the most popular ways to increase your monthly retirement income.


Common sources of retirement income


1. Social Security


Social Security


If you have earned enough work credits, which you earn by working and earning income each year, retirement benefits will typically be available to those who are starting at age 62. It is worth waiting. In 2023, the maximum Social Security benefit is $4,555 per monthly if you retire at 70. However, it is only $3,627 for those who retire at 65.


Full retirement age


This depends on your age and will be $2,572 if you retire at the age of 62


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2. Retirement plans

You may be able to deposit directly from your paycheck into plans offered by some employers, such as 401(k), 403(b), or 403(b). These plans can boost account balances by offering tax-advantaged benefits.


You can withdraw from a 401k at any age, but you must start withdrawals once you turn 72.


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3. Save!

  • Certificates of Deposit, also known as CDs, are savings accounts that hold money for a specific period of time. There are many types of CDs available, including high-yield jumbo, standard and high-yield jumbo.

  • Stocks can be used to represent ownership of a public company. Stocks can be purchased and sold by you, or you may invest in mutual funds, exchange-traded funds, or a basket of different stocks.

  • Bonds can be used to make loans to governments or companies. Fixed-income instruments pay interest at predictable, regular rates. This can make them attractive for retirees. You can either buy and sell bonds or invest in bond mutual funds, also known as ETFs. These are a collection of bonds.



Traditional IRA



Key distinctions


  • Contributing does not provide an immediate tax benefit.


  • Contributions may be withheld at any time, without penalties or taxes.


  • Contribution is reduced with higher incomes.


  • Retirement qualified withdrawals are exempt from tax.


  • Contributions that are deductible reduce your taxable income for the year in which they were made


  • Income can affect how deductions are phased out.


  • Retirement distributions are treated as ordinary income.


  • Once you reach a certain age, there are minimum distributions that must be paid. This age was 72 in the past; it rose to 73 in 2023 and to 75 in 2033.



Contribution limit


$6500 in 2023 (or $7,500 for those 50 years and older).



Early withdraw rules

Roth IRAs allow contributions and withdrawals to be made at any time. However, earnings before age 59 1/2 could be subject to income taxes and a 10% penalty. Roth IRA investments are subject to a five year holding period.


Unless you are exempt, all distributions from a traditional IRA prior to age 59 1/2 will be subject to taxes and a 10% penalty. This applies to both investment earnings and contributions.


4. Pensions

Employers such as the military or the federal government might offer pension plans, although they are less common. Pensions are typically defined benefit plans. The amount you receive in retirement is dependent on your earnings and years of work.


The monthly pension income cannot exceed either 100% or $265,000 (the threshold for 2023), depending on how much you earned in your three highest consecutive years. Cost-of-living adjustments may apply to the payments.


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How to Increase Your Monthly Retirement Income


Employer matching


If you are still working, make sure to check out the retirement plans offered by your employer. Many employers will match your deposits to a plan that offers 401(k).


  • You can maximize the amount you get from this arrangement by funding your 401(k) up to the amount that is required to capture matching contributions. This amount typically ranges between 3% to 6% of your annual income.


  • Employer matching arrangements can vary, but they often range from 50% to 100% of your contributions up to that limit.


Downsizing

A home can be an investment. It can also prove to be a good asset in retirement, particularly if the home’s value has increased. Equity is the difference between the value of your home and how much debt you have on it. You can release some equity by selling your house and moving to a less expensive place.

Better yet, capital gains up to $250,000 for single filers and $500,000 for joint filers are generally not subject to federal tax upon the sale of your primary residence.


Reverse mortgage

Reverse mortgages are loans against your equity. The loan can be paid in one lump sum or as a series or monthly payments. You repay the loan when the property is sold or moved out.


To be eligible for this option, you must be at least 62 years old and have a steady income. To be eligible, you will need to have a low balance on your mortgage or the property must be your own.


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Tip


Reverse mortgage payments are not subject to federal income taxes. The reverse mortgage loan balance grows for each dollar received.