Determining what qualifies as a “good” monthly retirement income for a couple depends on several personal factors – such as lifestyle, health needs, and geographic location – but national benchmarks provide a helpful starting point. According to recent data:
- Median Monthly Income: $7,056
- Average Monthly Income: $6,800
- Social Security Share: Around 67% of total income for most couples
- Healthcare Needs: Estimated at $330,000 over the course of retirement for a 65-year-old couple
So, what is considered “good”? For many, the target is replacing 70–80% of pre-retirement income. For example, a couple earning $100,000 per year before retirement should aim for about $6,700/month in retirement. But as always, this number will differ depending on your unique situation.
Whether you’re contemplating your retirement goals, estimating expenses, or strategizing for long-term financial security, this blog provides a comprehensive roadmap to guide you toward a comfortable and sustainable retirement lifestyle.
Key Takeaways
- Accessing your current financial health, setting attainable goals, and estimating your retirement expenses are crucial to determining a good monthly retirement income.
- Developing a diversified portfolio of income streams, including Social Security, pensions, investments, and strategic fund withdrawal plans, is essential for financial stability in retirement.
- Working with a financial advisor can optimize retirement income strategies, maximize investments in a tax-efficient manner, and help navigate complex decisions such as Social Security benefits and unexpected costs.
How Much Monthly Retirement Income Do Couples Need?
When planning for retirement, figuring out the right monthly income isn’t as simple as following a universal formula. What works for one couple might not suit another because it depends heavily on your lifestyle, future plans, and where you intend to settle down. That being said, financial planners have established some general benchmarks to help guide your planning.
Income Replacement Guidelines
A common rule of thumb is the income replacement rule, which advises couples to aim for replacing 70 – 80% of their pre-retirement income. This guideline reflects the fact that many expenses typically decrease in retirement – you’re no longer contributing to retirement accounts, paying employment taxes, or covering work-related costs like commuting or buying professional attire.
Here’s how it might break down:
- $100,000/year household → about $5,800 - $6,600 per month
- $200,000/year household → about $11,600 - $13,300 per month
- $300,000/year household → about $17,500 - $20,000 per month
These are starting points, but lifestyle, housing, health, long-term care needs, and where you retire will refine this number.
Factors That Affect Retirement Income Needs
While the income replacement rule offers a helpful baseline, several factors can significantly influence your actual needs.
Location plays a big role. A couple living on $5,000 per month in a rural area might find that amount insufficient in a high-cost city. State taxes also vary widely. For instance, retirees in states like Florida or Texas, which have no state income tax, face different financial realities compared to those in states such as California or New York.
Healthcare costs are another major consideration – and often underestimated. While some retirees might plan for healthcare expenses around $75,000, the reality for a couple retiring at 65 averages closer to $330,000. Medicare isn’t free; premiums, copayments, and deductibles can add up quickly. Plus, inflation and the rising costs of medical care mean these expenses are likely to grow over time. Don’t forget to account for potential long-term care needs, which can be a significant financial burden.
Housing decisions also impact how much income you’ll need. Downsizing or moving to a lower-cost area can reduce your monthly expenses, while maintaining a larger home or relocating to a high-demand destination can increase them.
Lifestyle choices matter too. If you plan to travel extensively, pursue expensive hobbies, or financially support family members, you’ll require more income than someone with a quieter, less costly lifestyle.
Lastly, debt obligations can’t be ignored. Couples entering retirement with mortgages, credit card debt, or other financial responsibilities will need higher monthly incomes than those who are debt-free.
Average Retirement Income for Couples
Looking at the national average of how other retirees manage their finances can give you a clearer picture of what to expect and help fine-tune your retirement strategy. The data shows a noticeable difference between what couples hope to earn in retirement and what they actually receive.
| Income Source | Median Monthly | Average Monthly |
|---|---|---|
| Total Household Income | $4,200 | $6,800 |
| Social Security | $2,800 | $3,200 |
| Retirement Account Withdrawal | $800 | $2,100 |
| Pensions | $600 | $1,200 |
| Other Income | $200 | $300 |
These figures reveal that the typical retired couple, based on the median, lives on about $4,200 per month. Meanwhile, the average income is higher at $6,800, skewed by wealthier households.
Social Security benefits make up about 67% of total income for most couples. The data also shows that many retirees rely minimally on retirement accounts and pensions, with median withdrawals from 401(k)s and IRAs at just $800 per month. These numbers can serve as a helpful benchmark when assessing your own readiness for retirement.
Evaluating Your Current Financial Position
Taking stock of your finances is a crucial first step in identifying any gaps in your retirement planning.
In retirement, your starting point should be to analyze your current financial situation. What are your assets? What are your liabilities? When do they need to be paid off? How much do you need to meet your living expenses? How much income are you earning? And do you have any surplus after using your income to pay your living expenses? The answers to these questions determine your current financial situation. This is where you’re starting from.
The FDIC provides a great template to use but so do many online websites and financial software packages. Whatever form you use as a template, the goal is to accurately assess all your assets, liabilities, income, and living expenses.
Putting together a list of everything you have is only the beginning. Not all assets are the same. Within this listing, you need to identify your investable assets. You cannot use all of your assets to fund your retirement. Some assets will never really contribute toward your retirement.
Take your home for example. Your primary residence typically does not contribute to your retirement unless you decide at some point to downsize. Downsizing usually means selling a home and purchasing a smaller, less expensive home for retirement. After you sell your current home, pay closing costs and any required taxes, and buy a smaller retirement home, the amount you have left over can contribute nicely to your investable assets.
Your investable assets are those that you can invest to earn an investment return and generate the needed cash flow to fund your retirement. These are generally referred to as your financial portfolio. Understanding what constitutes your financial portfolio is critical to successfully planning for retirement. These are the assets that comprise your retirement savings.
Estimating Retirement Expenses
Once you have your current financial situation sorted, the next step is estimating your retirement expenses. This helps you balance your overall plan by understanding how much income you’ll need each month. Some costs may decrease in retirement, while others could rise, so it’s important to plan carefully.
Here’s a look at the big categories:
- Housing: Mortgage or rent, insurance, property taxes, maintenance
- Healthcare: Premiums, copays, deductibles, and potential long-term care
- Transportation: Maintenance, insurance, gas — often reduced with one vehicle
- Food & Personal: Groceries, dining, clothing, personal care
- Leisure: Travel, hobbies, entertainment
- Unexpected Costs: Home repairs, emergencies, medical surprises
Building a Monthly Retirement Budget
Once you’ve estimated your expenses, the next step is creating a practical monthly budget. This will help you understand your spending needs and identify areas where you might need to adjust.
A common starting point is the 80% guideline: plan to spend about 80% of your pre-retirement income annually during retirement. For a couple aiming to replace 80% of an $200,000 pre-retirement income, here’s an example budget:
| Category | Amount | % of Budget |
|---|---|---|
| Housing | $4,000 | 30% |
| Healthcare | $2,000 | 15% |
| Food | $1,466 | 11% |
| Transportation | $1,066 | 8% |
| Travel & Leisure | $1,600 | 12% |
| Personal | $533 | 4% |
| Insurance | $400 | 3% |
| Misc/Emergency | $933 | 7% |
| Taxes | $1,333 | 10% |
| Total | $13,331 | 100% |
Again, this is just an example. You’ll need to adjust this budget based on your unique needs and lifestyle, especially if you plan to downsize, retire early, or travel extensively.
Strategies For Generating Retirement Income
When you finally retire, the planning needs to shift from solely accumulating enough assets to meet a couple’s retirement income needs to then actually generating that income. You might think this is easy; if you’ve already estimated your retirement expenses properly and saved the appropriate nest egg, isn’t it a simple matter of “turning on” the faucet to let all this income flow into your checking account?
In one sense, you could do that. You can take social security when you’re first eligible, you can accept whatever pension option feels like the best option, you can withdraw any arbitrary amount you want from your IRAs or 401Ks, you can withdraw only the required minimum withdrawal (RMD) from those IRAs or 401Ks, or you can simply withdraw the interest and dividend income which your portfolio generates. Those are all retirement income options. But they are not all equal options.
Account Withdrawals
Some withdrawals cause more income taxes than others. IRA & 401K withdrawals are 100% taxable, but Roth withdrawals are tax-free, and withdrawals from joint or trust accounts are typically only partially taxable. If you don’t pay attention to tax consequences through your retirement years, you’ll pay more in total taxes than you need to pay.
Some investments, such as dividend stocks, bonds, and real estate, can generate less interest and dividend income than the total return they generate. If you limit yourself to interest and dividend income only, you may be leaving money on the table. You should take a “total return” approach to these investments when deciding how much to withdraw.
Pensions
Some pensions offer very attractive high withdrawal rates, but only at the expense of the surviving spouse and your family. You should consider how long you need the annuity to survive when picking the withdrawal option.
Social Security
Social Security benefits can significantly increase if you postpone claiming your benefits for a few years. The goal should be to maximize the anticipated total lifetime benefits paid based on your life expectancy and other income sources you have.
Side Hustle or Part-Time Work
You might even consider a side hustle or part-time work if there’s something you truly enjoy doing and if you have the energy and time to pursue it. Every dollar you earn through employment or a little business you run helps you in two ways: it reduces the amount you need to tap from your nest egg, and it extends the life of your nest egg.
You May Need Additional Planning
Generating retirement in retirement requires some additional planning if you want to maximize your cash flow while also preserving your principal balance and minimizing your taxes. There is no one-size-fits-all perfect way to actually generate your retirement income.
Here also, there is really no such thing as an “average couple’s retirement income,” and what is good retirement income for one couple may not be good retirement income for another couple. It is a very individualistic need; therefore, how you meet that need will be individualistic.
You need to do what’s right for you. Longer life expectancies today, along with the investment options you pursue, all factor into how to best generate the retirement income you need.
While investment structure is not the scope of this blog article, it is still important to determine how to generate retirement income. In retirement, the sequence of returns becomes important. When accumulating your retirement nest egg, it doesn’t matter all that much when the stock market is up and when it is down. Throughout your investing life, it will be both up and down. Which years are up and which are down is known as the sequence of returns.
When you enter the retirement stage and withdraw from your retirement nest egg, the sequence can have a significant impact and even determine success and failure. While it is never possible to predict the sequence of returns, it is very possible to protect yourself from an adverse sequence.
Again, this is beyond the scope of this blog article, but the best approach requires consistent monitoring of your returns against established benchmarks and targets on a regular basis. “Setting it and forgetting it” is a recipe for disaster. Regular assessments can almost guarantee success if you take the necessary corrective actions when needed.
Let The Professionals Help You
Determining the right amount of retirement income and generating that income are not simple tasks. They require careful analysis and planning both in the years leading up to retirement and during your retirement years. You cannot rely on some abstract notion about the “average retirement income for a couple.” There is no such thing. Or at least, if there is an “average,” it is useless as a guide.
Each couple’s retirement income needs are unique to their circumstances and goals. Getting this right is important and too complicated to do yourself. Professional, experienced financial advisors will help you and can make the difference between success and failure. You wouldn’t diagnose and treat your own severe illness, and you wouldn’t represent yourself in court on a serious charge. You’d hire a really good doctor for your medical needs and a really good attorney for your legal case.
Retirement planning requires the same approach with a few added considerations. In the financial planning industry, “advisors” are allowed to sell products and take commissions. This approach is fraught with conflicts of interest and usually results in poor planning but great product sales.
Fortunately, there is a solution. Today, you can take advantage of working with a 100% objective, fee-only fiduciary advisor. Financial advisors who rise to this level will always work in your best interest; they are legally required to do so. Their advice will always be objective; you’ll never have to worry whether their recommendations are excuses to sell you a mutual fund or an annuity. You will know with certainty that their advice is objective and represents their best assessment of what you must do to achieve your financial goals and dreams.
Objective, fee-only fiduciaries will walk through all the steps above, and the best ones will do so in a way that is easy to understand. There won’t be any mumbo-jumbo or fancy jargon. They will explain what you must do and why in plain, understandable language and provide clear, actionable steps.
First Financial Consulting has 45+ years of experience as a fee-only, 100% objective fiduciary advisor. We have helped hundreds of clients determine what retirement income they will need, develop a plan to achieve it, and then help implement that plan consistently across the years and decades – not just up to the date you retire, but actually up to and all the way through retirement. If you want to learn more about how we help our clients secure their retirements, use the link below to schedule a complimentary meeting with one of our advisors.
Greg Welborn is a Principal at First Financial Consulting. He has more than 35 years’ experience in providing 100% objective advice, always focusing on the client’s best interests.
Greg Welborn is a Principal at First Financial Consulting. He has more than 35 years’ experience in providing 100% objective advice, always focusing on the client’s best interests.
