Average Retirement Income
The phrase average retirement income has a number of different meanings. The most common is the amount of income that the average retiree has coming in each year. Other popular meanings can include the amount of savings the average retiree has and the amount of money a retired person or couple needs to lead a comfortable lifestyle.
Can You Live on the Average Retirement Income?
The average retirement income in the United States in 2009 was around $29,000 a year according to the US Census Bureau. This figure included Social Security plus savings, pensions, 401K distributions and other income. It did not include savings and tax deferred investments but it could include payments from vehicles such as annuities.
It is obvious that a lot of retired persons and couples would not like to live on $29,000 a year. They would not be in poverty on that income but they would not be able to live the lifestyle to which they have become accustomed. Many people would have to give up on most of their vacations, hobbies and leisure activities in order to live on that sum.
A person with just $29,000 a year in income and no savings and investments available could also be quickly bankrupted by an emergency such as an illness or the loss of a home. Quite a few retired people end up selling everything they own and declaring bankruptcy in the face of an emergency.
Therefore everybody who is thinking about retirement needs to ask themselves the question: can I live on the average retirement income? An even more important question to ask is do I want to live on the average retirement income?
Retirement Planning and the Average Retirement Income
If your answer to the two questions asked above is no, it is time for you to get serious about retirement planning. Most people should be able to give themselves a much larger retirement income with good retirement planning.
A good place to start is to set aside as much money in retirement savings and investments as you can. Many people make the mistake of only using vehicles such as IRAs and 401ks for retirement savings. There are strict limits on what you can put in such plans but there are other tax-deferred vehicles that have no limits on the amounts you can save in them. These are called deferred annuities and anybody can use one to greatly increase the amount they are saving for annuities.
Additional Sources of Retirement Income
Something else that many people do not realize is that a person can use annuities to invest in vehicles such as stock market indexes that have a higher rate of return. That means a person can give himself a tax deferred vehicle that beats inflation which he can put unlimited amounts of money into.
A good way to increase retirement income is to lock in several different sources of income. This way you can augment traditional retirement funding such as Social Security and pensions.
There are many instruments that enable even middle and working class people to do this. For example: someone who is retiring and has a lot of additional cash available can purchase tax-deferred SPIA (singe premium income) annuities that can provide a regular payment. A couple that is retiring and owns a home can purchase a reverse mortgage which can provide income for the rest of their lives.
There are many other means of augmenting retirement income available. The best way to take advantage of them is through comprehensive retirement planning.
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Steven Hart is a freelance writer and a Financial Advisor from Cary, IL. He writes about finance topics like annuities, insurance, investment, and retirement.
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