You certainly know what your retirement income is — or what it likely will be when that time comes. But how does that number compare to the average? Here’s your (rough) answer.
The inputs and outputs
The answer to the question requires a handful of clarifications. First, the figure combines Social Security income with income from other sources, like pensions and retirement savings. Second, know that the average is skewed higher by a small handful of very high earners. And third, we’ll need to make some minor mathematical assumptions to come up with a meaningful number.
And just for better perspective, we’re going to add taxes and Medicare costs to the mix.
First things first. As of 2024 (the latest year for which the data exists), the Bureau of Labor Statistics reports the average 65-and-up U.S. household earned pretax income of $67,462 per year.
That’s a somewhat misleading number, though, in that these households are home to an average of 1.8 residents. In some of these households, one retired resident or the other may or may not have worked as much, or at all. The BLS goes on to detail that the average income per household member is $47,610.
A significant piece of that income comes from Social Security. Indeed, given this year’s average monthly Social Security payment of $2,071, $24,852 of it comes from the entitlement program.
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So, how much of this income is taken out for taxes? Not too much, actually. Although withdrawals from ordinary, non-Roth retirement accounts are subject to taxation (as is a portion of higher earners’ Social Security payments), for the majority of retirees, most — if not all — of their Social Security benefits are tax-exempt. Although the rest can be taxed, the federal income taxation rate of 12% of whatever’s still taxable after standard deductions are taken from the annual income of $47,610 (only $22,758 of which isn’t Social Security income) means mostly half of all retirees will owe little to no income taxes. And, most of the rest won’t owe much.
Most individual states also offer similar tax relief from state taxation at these income levels, by the way.
Still, other costs chip away at retirees’ bottom lines. While Medicare Part A (hospitalization) will be free for most retirees with incomes around the aforementioned average, for instance, Medicare Part B (primary care) coverage will cost most retirees $202.90 per month, or $2,434.80 per year. Premiums for parts C, D, and Medigap also vary, as do the yearly deductibles for each part.
The number
So what’s the number? Based on the information above, the average retiree is netting around $45,000 per year, after taxes and typical health insurance coverage.
Just take that rounded figure with a big grain of salt. It’s based on data spanning a huge range of inputs. Most people aged 65 and up are likely doing measurably better or measurably worse. Indeed, the Census Bureau reports that about one-fifth of retirees’ incomes consist of nearly nothing but Social Security benefits. The number also doesn’t paint a detailed picture of the difference between single-occupant households and households consisting of two retirees, which can be enormous, depending on the situation.
Nevertheless, it’s a decent ballpark benchmark.
