With each passing year, more baby boomers are reaching retirement age. There is a lot of discussion surrounding the management of retirement savings and how to turn this money into an income stream. This conversation is becoming increasingly important as pensions are obsolete for many and the Medicare system is being squeezed for all it is worth.
According to the U.S. Census Bureau, the median retirement income for household age in 2019 is as follows:
AGE OF HOUSEHOLD MEDIAN INCOME
Households Aged 55-59 $73,645
Households Aged 60-64 $63,919
Households Aged 65-69 $54,124
Households Aged 70-74 $46,797
Households Aged 75 and Older: $31,893
Whether you fall below or above these average numbers, it is important to overview your potential or current retirement income. Here are the five areas from which retirees see the most income. We will also be discussing ways in which to boost your income from each.
1. Average Social Security Income:
Over 85% of retirees age 65 and older receive Social Security income. In 2019, these monthly payments were increased by 2.9% to adjust for the increased cost of living. The average monthly income was raised from $1,422 in 2018 to $1,461 in 2019. Other than occasional adjustments for inflation, the monthly payments from Social Security remain quite constant. The only way to receive more money is to postpone the time you start collecting the payments.
2. Average Asset Income:
Surveys and studies show that retirees in 2019 only receive an average of $164,000 from their assets such as 401(k)s and IRAs. Although this number is up from previous years, it is still not enough money to survive. The best way for a retiree to make this money last is by spending less money. Individuals who are younger should continue investing into their IRAs and other retirement funds.
3. Average Pension Income:
Pensions are quickly becoming obsolete, as only 31% of retirees track income from this source. Those retirees who do have pensions often have double the amount of income than their non-pensioned counterparts. While it is nearly impossible to increase the income of a pension, you can be diligent about taking out monthly payments versus a lump sum.
4. Average Work Income:
The percentage of elderly individuals in the workforce is expected to rise to 32% by 2020. Transamerica predicts that two-thirds of all baby boomers will be working past retirement age. Retirees can actually experience some social, financial and mental benefits by joining the workforce. It is recommendable to find a job you love doing or to find streams of passive income.
5. Veteran’s Benefits or Public Assistance:
According to the Pensions Rights Center, about 7% of all retirees are receiving financial help from the government. This public assistance ranges between $5,866 and $6,542 in median benefit. Low-income seniors can conduct research on all of the organizations that are willing to aid retirees in need. Veterans should also contact their local VA office for more information about the available benefits.
Important Trends for Retirees to Follow in 2019
The median income for retirees today was decided in part by the behavior of retirees in the past. However, there are also factors happening today that contribute to these averages.
Focus on De-accumulation: In retirement age, individuals should be focusing on how to spend their money wisely. The goal should be on de-accumulation, not on creating more income.
Rising Interest Rates: Interest rates are on a steady rise after some historic lows. This is bad news for people starting to pay back loans.
Stock Market and Home Prices: Both the stock and housing markets are experiencing a plateauing effect after years of great returns.