The economic landscape in the United States presents a challenging scenario for Americans nearing retirement. The convergence of inflation, high interest rates and an unpredictable stock market has significantly impacted retirement plans. Despite a decrease in inflation, concerns about income keeping pace with rising costs persist. Questions about the adequacy of Social Security benefits add to the uncertainty.
Social Security, often considered the bedrock of retirement income, offers limited relief. In 2023, the average Social Security retirement benefit was $1,827, which translates to $21,924 per year or $423 per week. This amount, though consistent, falls short of ensuring a comfortable retirement, especially when considering medical expenses.
It’s also important to consider that the amount of Social Security benefits you receive may vary. Benefits could be lower for those with less than 35 years of employment history, lower lifetime earnings or who opt for early benefits at age 62 instead of waiting for full retirement age or later for increased benefits.
In 2022, the U.S. Census Bureau reported that the median annual income for Americans aged 65 and older, including sources like retirement accounts and Social Security, was $50,290. This amount falls short of the $74,580 median household income. The data also reveals a slight decline in senior income compared to 2020, highlighting an expanding financial disparity.
The Bureau of Labor Statistics reveals that Americans aged 65 and older had an average annual expenditure of $57,818 in 2022, exceeding their median income. This discrepancy indicates a potential need for additional income sources or a return to the workforce, as evidenced by a Paychex study suggesting that about one-sixth of retired Americans consider resuming work.
Financial advisers emphasize the importance of retirement planning beyond Social Security. They suggest exploring ways to optimize existing assets, reduce expenses or reenter the workforce. Despite financial challenges, many seniors find creative ways to enjoy fulfilling retirements on modest incomes.
Retirement planning in the U.S. demands a comprehensive strategy, taking into account individual needs and lifestyle preferences.
To ensure adequate savings for retirement, consider these steps:
Calculate monthly needs: Estimate your monthly expenses in retirement, accounting for housing, healthcare, utilities, food and leisure activities. This will give you a clearer picture of the income required to maintain your desired lifestyle.
Factor in inflation: Remember that the cost of living will likely increase over time because of inflation. Ensure your retirement plan accounts for this.
Consider healthcare costs: Healthcare can be a significant expense in retirement. Plan for both regular medical costs and potential long-term care needs.
Diversify income sources: Besides Social Security, consider other income sources like pensions, retirement accounts like 401(k)s and individual retirement accounts (IRAs) and investments. Diversification can provide more stability and flexibility.
Plan for longevity: People are living longer, so plan your finances to last for potentially 20 to 30 years or more post-retirement.
Regular review and adjustments: Regularly review your retirement plan to ensure it stays aligned with your changing needs and economic conditions.
Seek professional advice: A financial adviser can help tailor a retirement plan to your specific circumstances, considering factors like risk tolerance, investment preferences and retirement goals.
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This article Average Retirement Income In America Revealed — Will You Make Enough Each Month? originally appeared on Benzinga.com
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