What are your plans for retirement funding? What approaches do other people take? In 2023, what can we expect to be the typical retirement income? Has it altered significantly from previous years now that the pandemic is over and the economy is trying to gauge whether or not things will improve? How close to the norm would you say you are?
Especially in light of the state of the economy right now. Different families have varying degrees of financial success during the past year. Inflation’s ascent has been difficult, and the stock market’s slump has persisted. Some localities have seen increases in housing costs, while others have seen decreases. The well-off have had no trouble keeping up with the rising cost of living, while those with fewer financial resources have felt the effects more acutely.
But where do YOU currently stand, and what does that mean for your retirement prospects? How stable is your saving rate these days? What does that mean for my retirement savings?
It can be challenging to tell if your future is safe. There are a lot of unknowns, but you may get a rough idea of some of them by making comparisons to the norm.
You, however, are not typical. Remember, as you look at the data below, your retirement prospects depend on various variables. Making a well-thought-out retirement strategy is the best method to prepare for the future and boost confidence.
The Typical Retirement Income and the Threat of Poverty in Later Life
The Boston College Center produces the National Retirement Risk Index (NRRI) for Retirement Research. It’s a gauge of how many retiree households in the United States will likely fall short of their pre-retirement living standards. Every year, the index is revised.
Most families struggle to make ends meet.
Their research shows that by 2023, over half of retirees will be in danger of financial hardship.
Although the most recent research uses 2019 data, contemporary economic considerations have been considered.
What did they decide? After recalculating the NRRI with the most recent methodology, we find that our previous studies’ conclusions still hold: even if they work until they are 65 and annuitize all of their financial assets, including the earnings from a reverse mortgage on their homes, about half of today’s households will not have enough retirement income to sustain their pre-retirement level of life. The consistency of the findings validates the retirement saving challenge faced by modern households with working-age members and the need to reform our retirement system to ensure that all workers have access to employer-sponsored retirement plans. Jump down to view typical predicted retirement income for 2023. “Only with continuous coverage will workers be able to build the resources to maintain their living level in retirement. Alternatively, you can use the NewRetirement Planner to figure out how much money you’ll have in retirement, determine whether or not that’s enough, and discover what steps to take right now to feel secure about your financial future.
Comparison of the Mean and the Median
The median income is presented in the following table. Most retirement-age households have incomes closer to the median than the average. (The true average is called the “mean.”)
The distinctions between mean and median are as follows:
Average Funding for Old Age
The average or mean income is found by adding up all the money in all the households and then dividing it by the total number of homes. This is a highly misleading figure. The figures will be skewed upwards by the highest-earning households, giving the impression that “average” wages are quite high.
The term “mean” (or “average”) has little to no relevance in the year 2023. Those in affluent families have it pretty good. And low-income families have largely yet to do anything but hang on or pile on additional debt.
The Average Pension for Retirees
The middle income is found by ranking all incomes from lowest to highest. Half of the earnings on the list will be higher than the median income, while half will be lower. According to many statisticians, the median income is the most telling figure.
With incomes becoming increasingly dissimilar, the median is likely a better indicator of the population.
How Much Will the Median Aged Person Make in 2023?
The typical household income in 2023 is $70,784, according to the most recent data from 2021. This is a rather small decrease compared to 2020.
The typical retirement income for a family in 2023 is broken down by age.
The median income figure may look “healthy” or “above average” to some. However, the numerical value is only part of the picture. Also, it doesn’t show the dreaded “retirement crisis” reported about so frequently.
Additionally, there is a rationale for this. There are far more retirees than this statistic suggests, especially among older people.
The retirement income of single women is far lower than that of men.
The worst part is not even the inevitable decline in retirement income as the population ages.
Statistics show that single people, especially single women, struggle to cope with the averages. Put it another way, “About half of all Americans 65 and up live on less than $25,000 a year — far less than the amount that most need to meet day-to-day living and health care expenses,” as the Pension Rights Center reported.
Do National Averages Have Any Meaning? In what range does the typical retiree in YOUR state expect to live?
When calculating a typical retirement income, one must take one’s age into account. Location is also very significant.
The country’s average retirement income is intriguing, but it will only help you a little. After all, in the United States, living expenses and wages vary greatly from one place to another.
The average household income in Maryland is $94,789. This is followed by the District of Columbia, New Hampshire, New Jersey, and Utah.
Mississippi has the lowest average household income, where residents bring in just $45,134 yearly, or less than half what Maryland residents make. West Virginia, Arkansas, New Mexico, and Kentucky are the other states with the lowest per capita income.
Examining One’s Salary about That of One’s Neighbors
The Census Bureau provides access to regional income averages and other demographic information. This could be a useful indicator of how you’re doing relative to your contemporaries, but ultimately, the only thing that matters is that your money meets your necessities.
To search the Census Bureau, click here. Enter your current address (or the address of the place you’re considering moving to retire), and the desired information will appear. What they provide is the “median household income.”
Where Do People Typically Get Their Retirement Funds, and What Can You Do to Increase Yours?
Here are the four most common ways retirees make money and some advice on maximizing each.
1. Estimated 2023 Social Security Benefits Average
For 2023, rising inflation means an increase of 8.7 percent in the average monthly Social Security benefit. The average monthly Social Security benefit is now $1,827, or about $22,000 a year, according to the Cost of Living Adjustment (COLA).
This was the first time anyone envisioned Social Security as a retirement plan. It was meant solely as a supplement to your retirement funds. Maximizing your compensation, though, can have a significant impact over time.
Strategies For Maximizing Your Social Security Benefits
How may one maximize their Social Security benefits? To that end, I offer two suggestions:
To maximize your monthly payout, you should delay starting your benefits until full retirement age (often between ages 67 and 70). You can significantly increase your retirement savings by delaying the start of Social Security.
And the message is starting to sink in for retirees. In the past, 62 was the typical retirement age when benefits were first received. Males are more likely than women to begin receiving benefits at an earlier age; currently, 36% of males begin receiving benefits at age 66, and 27% begin receiving benefits at age 62. The most common starting age for women is a tie. 31% of women begin their careers at age 62, and another 31% do so at age 66.
If you are married, the higher-earning spouse should delay the start of benefits for as long as feasible to account for the lower-earning spouse’s potential future income. As you can see, the earning potential for retirees in the context of independent living could be much higher.
With the appropriate approach to filing claims, you can assist in lessening the impact of that issue. If you’re going to tie the knot, it’s time to start thinking about your Social Security strategy.
2. Typical Asset-Based Retirement Income in 2023
Half of working adults surveyed in the most recent Transamerica Retirement Survey said they plan to rely on their resources, such as 401(k)s, 403(b)s, IRAs (38%), or other savings and investments, as their primary source of income in retirement. Workers at big and medium businesses are more likely to rely on retirement accounts.
The estimations are consistent with those reported by the Pension Rights Center. They discovered, however, that most seniors need more tucked away for emergencies. Only a minority (66%) of people are supported financially. The annual income of half of those people is less than $1,754.
Most people need more resources to provide for their necessities. The median amount baby boomers have saved for retirement needs to be increased to support them.
As of late 2020, Transamerica estimates that the median worker has saved $93,000 for retirement. Estimated median retirement savings for full-time workers are $104,000, more than double that of part-time workers’ savings of $48,000. Only $18% of workers had retirement savings of over $10,000. Six percent of full-time workers and twelve percent of part-time workers report having no retirement savings.
How much money does the typical savings plan generate in retirement?
Withdrawing 4 percent annually (a value twice that of the averages mentioned above) would only yield roughly $6,560 in retirement income in the first year of retirement from savings of $164,000 (a value twice that of the averages cited above).
Most families could not survive on that.
Methods For Increasing Your Savings-Based Income:
Put aside extra money. It’s not that simple.
- When you’re young, you should invest as much as possible in a 401(k) and an IRA. Maintain your savings rate, and you will have a comfortable nest egg when you stop working.
- It gets more challenging in the middle of your career. Spending on loved ones requires restraint at the moment. You should give your full attention to make up for lost time.
- Is retirement a reality for you? Cutting back on expenses or working longer could be the greatest approach to supplement retirement funds. Here are 20 methods to reduce retirement expenses so your money will last longer.
The greatest strategy to convert your money into retirement income is something you should look into. Consider employing a “bucket” approach, as well. Some of your assets will increase faster, while others will be protected against loss.
Another wonderful chance is to see a financial counselor in order to discover methods of efficiently converting assets into income. Working with a Certified Financial Planner through NewRetirement Advisors is a convenient and novel experience.
3. The Typical Pension Income at Retirement
According to data compiled by the Pension Rights Center, one in three retirees benefits from pension income. There is a declining trend here. You should count yourself very fortunate to have this money.
Other seniors who are fortunate enough to have a pension receive at least twice as much money each year as others who rely solely on Social Security.
The median private pension is $9,262, the median state/local pension is $22,172, the median federal pension is $30,061, and the median railroad pension is $24,592.
Improving Your Retirement Income
You won’t be able to increase your pension benefits. It’s possible to weigh the pros and cons of monthly payments vs. a one-time payout and make an informed decision. In addition, it’s a good idea to check in with the plan administrator regularly to learn how things are going financially. Sadly, many retirement plans are inadequately funded.
Use a retirement calculator that includes pension controls if you are fortunate to have a pension.
4. The Median Work-Retirement Income
The money you make from working after you retire may be crucial.
The Bureau of Labor Statistics had anticipated, before the pandemic, an increase in the number of workers aged 65 and older, including those aged 75 and older.
However, based on an analysis of the most recent official labor force data by the Pew Research Center, as of the third quarter of 2021, 50.3% of U.S. adults 55 and older reported being out of the labor market due to retirement. This suggests a downward trend in the number of persons working past traditional retirement ages.
Before the pandemic, 48.1% of people retired in the third quarter of 2019. Concerning specific age categories, 66.9% of those between the ages of 65 and 74 were retired in the third quarter of 2021, up from 64.0% in the same quarter of 2019.
Methods to Maximize Earnings During Retirement
One solution is to put off retirement until later. You could also consider getting a retirement job if you don’t have one.
It need not be a typical 9 to 5 job. It need not be tense in any way. In fact, it’s more important to find work you love than to make a lot of money.
Any money you make working will help you enormously, both monetarily and in terms of your mental and social well-being. Learn about the greatest careers for retirees and the advantages of continuing to work after retirement. Have you given any thought to unengaged means of making money?
See how your salary today will affect your retirement savings with the help of the New Retirement Planner. To find the ideal strategy, try out several what-ifs with differing levels of employment income across varying periods.
Significant Future Economic Developments Impacting Retirement Income
Where retirees worked, how much they saved, whether or not they bought a property, and other factors will impact the average retirement income in 2023. Retirement income is influenced not only by the economy but also by the choices seniors make today.
The following economic shifts could affect your retirement savings:
The possibility of a downturn.
Whether or not a recession will occur shortly is a heated debate among economists. Losing employment is a recession’s most significant negative effect on income and savings.
Inflation
When prices are rising faster than wages, everyone’s purchasing power decreases. Inflation is one of the most difficult economic scenarios for retirees who cannot count on a salary increase to keep up with inflation.
The Financial Health of Medicare And Social Security
The budgets of both Medicare and Social Security are in serious jeopardy. The future of these programs that give the bulk of retirement income is still being determined, but if you look at the data, you can see significant problems.
Your benefits are safe if you’re of retirement age, but those of future claimants may be lowered.
Viability of Pension Programs
Many pension programs are underfunded, just like Social Security and Medicare. Those of you who are fortunate to have a pension should look into the financial health of your plan.
Rates of Interest
Though they have increased considerably since 2020, interest rates remain exceptionally low by historical standards.
Uncertainty in the Stock Market
It’s impossible to anticipate the stock market, and investors have lost much money during the past two years. However, the most recent patterns have risen since bottoming out in October of 2022.
The future has no guarantees.
Deferred lifetime annuities have seen a rise in popularity.
Deferred lifetime annuities (sometimes called longevity annuities) are becoming increasingly popular, as reported by LIMRA. Insurance in the form of a deferred lifetime annuity will ensure a steady income stream beginning on a date in the future of your choosing. Use the lifetime annuity calculator to determine how much future income you could reasonably expect to get.
The Lockbox Strategy, created by Nobel Laureate William Sharpe, incorporates annuities to generate income in retirement.
Strict property market conditions.
Your local housing market may be experiencing an increase or decrease, but the national average is likely higher. CoreLogic reports that annual home price growth slowed to 2% in April from 3.1 percent in March, and it expects this trend to persist until 2023.
And this, although rates are on the rise.
It’s not likely that your first thought is on how your house could affect your retirement savings. However, several options exist for converting home equity into retirement income, and your house is likely your most valuable financial asset.
Downsizing, cash-out refinancing, or arranging a reverse mortgage are all ways to access the equity in your home and use it to increase your wealth, supplement your retirement income, or extend the life of your other assets.
Considerations Beyond 2023 Retirement Income
The average retirement income in 2023 is interesting since it might serve as a barometer for your financial well-being.
The key to a comfortable retirement, though, is understanding your predicted retirement income from now to retirement and forecasting your future consumption.