What Is a Good Monthly Retirement Income?
A good monthly retirement income probably isn't that much less than your pre-retirement income.
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A good monthly retirement income is typically 80% of pre-retirement income; advisors often suggest a range between 70% and a more conservative 90%. Median income for households headed by someone over 65 was $56,680, or $4,723 per month, according to the U.S. Census Bureau.
According to the U.S. Bureau of Labor Statistics, consumers 65 and over spend an average of $60,087 annually, or $5,007 per month, which was more than the median income for 65-and-up households.
Here are some popular sources of good monthly retirement income and ways to increase that income.
4 common sources of monthly retirement income
1. Social Security
Social Security retirement benefits are typically available to people starting at age 62 if they’ve earned enough work credits (which you earn each year by working and earning income). However, it can pay to wait. The maximum Social Security benefit at full retirement age is $4,018 per month in 2025 and $4,152 in 2026. Your full retirement age depends on when you were born.
2. Retirement plans
Some employers may offer plans such as 401(k)s or 403(b)s, into which you can make deposits directly from your paycheck. These plans have tax-advantaged benefits that can give account balances a boost.
In general, you can begin withdrawing from a 401(k) at age 59 1/2, and you're required to start taking withdrawals when you reach age 72 (or 73 if you reach age 72 after Dec. 31, 2022).
3. Savings
This includes financial instruments such as certificates of deposit, stocks, bonds, individual retirement accounts and other sources.
Certificates of deposit, or CDs, are savings accounts for dedicated sums of money for a fixed period of months or years. There are different types of CDs, such as standard, high-yield jumbo and more.
You can buy and sell specific stocks yourself, or you can invest in mutual funds or exchange-traded funds, which are baskets of different types of stocks.
Bonds are fixed-income instruments that usually pay interest at regular, predictable rates and intervals. You can buy and sell specific bonds yourself, or you can invest in bond mutual funds or ETFs.
Other sources might include inheritance, investment property, savings accounts or even health savings accounts.
An IRA is a tax-deferred retirement account. Depending on which type of IRA you choose (Roth or traditional), your contributions may be tax-deductible or withdrawals may be tax-free.
» MORE: How to invest $100,000
Roth IRA | Traditional IRA | |
|---|---|---|
Annual contribution limit | $7,000 in 2025 ($8,000 if age 50 and older). The contribution limit for IRAs is a combined limit. | |
Income | Ability to contribute is phased out at higher incomes. | Ability to deduct contributions can be phased out depending on income and access to an employer retirement plan. |
Tax benefits | No immediate tax benefit for contributing; distributions in retirement are tax-free. | If deductible, contributions reduce taxable income in the year they are made. Distributions in retirement are taxed as ordinary income. |
Early withdrawal options | Roth IRAs allow contributions to be withdrawn at any time, but earnings distributed before age 59 ½, may be subject to a 10% penalty and income taxes, unless you meet an exception. There is also a five-year holding rule for Roth IRA investment earnings. | Unless you meet an exception, distributions from a traditional IRA before age 59 ½ are subject to taxes and a 10% penalty. This applies to both contributions and investment earnings. |
Distributions in retirement | No required minimum distributions. | There are required minimum distributions once you reach a certain age. That age was previously 72; in 2023, it increased to 73 and in 2033, it will increase again to 75. |
4. Pensions
Although less common these days, employers such as the military and the federal government may offer pension plans. Pensions are usually defined benefit plans, where the amount you receive in retirement depends on years worked and earnings over time.
» MORE: Average 401(k) balance by age
Ways to increase your monthly retirement income
Employer matching
If you’re still working, be sure to take a look at the retirement plans your employer offers. Some employers match the deposits you make to a 401(k) plan.
To maximize the amount of free money you can get from that arrangement, fund your 401(k) at least up to the amount required to capture matching contributions, which is typically between 3% and 6% of your annual salary.
Employer matching arrangements vary but frequently range from 50% to 100% of your contributions, up to that limit.
If you’re under age 50, your maximum allowed 401(k) contribution is $23,500 in 2025. People age 50 and older can contribute an extra $7,500 as a catch-up contribution. Due to the Secure 2.0 Act, those ages 60, 61, 62 and 63 get a higher catch-up contribution of $11,250 .
Downsizing
Purchasing a home is an investment and can be valuable during retirement, especially if home prices have risen since you bought the property. Selling your home and moving to a more affordable place can free up some of your home equity for retirement.
Even better, up to $250,000 of capital gains for single filers ($500,000 for joint filers) are typically not subject to federal capital gains tax when selling your primary home.
Reverse mortgage
A reverse mortgage is a loan against the equity in your home. You receive a lump sum, a series of payments or a line of credit, and you repay the loan when you sell or move out of the home.
You need to be at least 62 and on a fixed income to qualify for this option. You’ll also need to have a low mortgage balance or own the home outright.
Payments from a reverse mortgage typically aren't subject to federal income tax. However, for every dollar you receive from a reverse mortgage, the balance on the loan grows.
» MORE: How to retire early
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