As Americans approach retirement age, the question of how much money they will need each month to maintain their standard of living becomes increasingly important. This can be daunting for average working-class America as they may not have saved enough to live off their retirement savings comfortably. The importance of determining how much most average people need in retirement cannot be overstated.
Per a report done by the National Institute on Retirement Security survey, 66% of working Americans have little or no retirement savings. That staggering percentage means that a significant portion of the population will rely heavily on social security benefits, as well as other forms of retirement income. Furthermore, the median retirement account balance for households headed by someone aged 55-64 is only $104,000, according to data from the Federal Reserve. This underscores the need for future retirees to plan carefully for retirement to ensure they have enough monthly income to live comfortably.
Exploring statistical data and surveys can provide an understanding of how much monthly income the average American will need in retirement. This includes considering location, lifestyle, healthcare, and long-term care expenses. By planning early and taking steps to boost retirement income, the average person can ensure they have enough money each month to maintain their standard of living and enjoy a comfortable retirement without financial worries.
Here are some other notable facts and statistics on retirement savings:
- In a 2013 survey Government Accountability Office, only 48% of the people surveyed had some type of retirement account.
- The Economic Policy Institute found that the median retirement savings for families with members aged 56-61 in 2016 were just $21,000. The report noted that half the people surveyed had no retirement savings at all.
- The average retirement savings for Americans aged 65 and over is $209.984, according to a 2018 report by Vanguard. This number was based on people who had retirement accounts and not the general public.
The above illustrates that most Americans are not saving enough. But what is enough? What is the minimum monthly income that a retiree will need from their retirement savings to maintain their lifestyle? A survey done by Charles Schwab showed the average retiree spends $48,000 a year, or $4,000 a month. However, this figure varies widely depending on several factors, including location, lifestyle, and healthcare costs.
Another survey conducted by Fidelity Investments found that a retiree would need about 80% of their pre-retirement income just to maintain their current standard of living in retirement. This means that if a retiree earned $75,000 a year before retirement, they would need about $60,000 a year, or $5,000 a month, in retirement.
Of course, these figures are just averages and may not apply to every retiree. For example, retirees living in expensive cities like New York or San Francisco may need significantly more than $4,000 or $5,000 a month to maintain their standard of living. Similarly, retirees with significant healthcare needs may require more monthly money to cover expenses.
It is also important to consider that retirees may face additional expenses, such as long-term care costs. U.S. Department of Health and Human Services shows that the average cost of a private room in a nursing home is $8,365 per month or $100,380 per year. These numbers can vary widely depending on location, so it is important to research costs in your area.
In addition to saving for retirement, one should consider other strategies to boost their retirement income. For example, delaying Social Security benefits can increase monthly payments by as much as 8% annually up to age 70. Retirees may also want to consider part-time work, downsizing their home, or relocating to a more affordable area to reduce expenses.
The bottom line is that most Americans will need a significant amount of money each month to maintain their current lifestyle in retirement. While $4,000 to $5,000 a month may be a good rule of thumb, it is important to consider location, lifestyle, and healthcare costs. The average American can enjoy a comfortable retirement without financial worries by planning early, saving diligently, and considering other strategies to boost retirement income.