What is the Average Retirement Income
What is the average retirement income? Whatever your age, retirement is something you should be thinking about. And, the sooner you begin to think seriously about your retirement, the better off you will be when it comes time for you to retire. That is, if you take action.
“We didn’t plan to fail, we just failed to plan.”
What is the average retirement income. In the year 2015, the median income, which I believe is a better indicator than average income which can be skewed due to a small percentage of people making a lot money, is less than $20,000 per year, or about $1666.00 per month for most people.
This means that because the average social security retirement income is about $1384.00 per month, only a few hundred dollars per month comes from savings or other income sources for the majority of retirees.
What is the average retirement income is a question you should ask in order to avoid the doldrums of a sparse retirement. What with typical expenses such as food, insurance, medical bills, auto, upkeep of home, cable, internet, mobile phone, and that is if you don’t have a mortgage on your home, you can see how it is very difficult for most people just to meet their basic obligations during retirement.
This, of course, leaves very little, if anything left over to travel, buy food, enjoy good restaurants, attend concerts, sporting events, buy clothes, buy gifts, etc. Many people are forced to take part time employment to supplement their limited income just to get by.
These typical retirement jobs usually pay very little, and are often demeaning, and undignified for someone that has worked their entire life, raised a family, and been a solid, tax paying, contributing member of society.
Some folks are less mobile as they age, and even going to a job a few times a week, can become a very daunting task. I personally know of many people, my own mother included, that are dependent on the support, and generosity of their children, and other relatives to provide the funding needed to meet their needs as they age.
This can be a huge burden on relatives, and can create problems other than just financial. It can put a strain on family relationships, and bring on stress which can lead to health, and drug and alcohol dependency issues.
The costs of assisted living senior centers can be astronomical. The elderly are now living longer than ever before. Many seniors live well into their 90’s and beyond, so these related expenses can deplete even well funded retirement plans.
Long term care insurance can cover many of these costs, but the high price tag for these plans rules out the vast majority of people.
Best Retirement Savings Plans
What is the average retirement income is less than you will likely need. Obviously, the younger you are, and the further from retirement you are, the better chance you have, and the easier road you will have to create a wonderful retirement. Time is your greatest ally.
Being disciplined is also an important factor to a successful retirement. The sooner you undertake your retirement planning, the better.
This is not to say that someone that is close to retirement age cannot improve his or her ultimate retirement situation by some careful planning. You certainly can.
The sooner you start saving for retirement the better. But what are the best retirement savings plans? Assuming you won’t have a pension, a guaranteed retirement income, or a very generous relative that will cover all of your costs and give you some leftover to enjoy life in your later years, these are your best bet to have significant money at retirement.
Matching 401K or other company retirement plan.
If you are lucky enough to have a company retirement plan such as a matching 401K, you should max this out. Many of these plans will match up to a certain percentage that you put in, which is essentially free money.
The fact that this money, not including the amount that your company matches, is taken from your paycheck, it forces you to save for your retirement. It essentially protects you from yourself.
If you look at this money as taxes, or money that you can’t touch, you will maximize it’s benefits. These company organized retirement plans are a great way to save for retirement.
If you are unlucky enough to not have a retirement plan at work, or if you are self employed, and haven’t set up a SEP or other self employed retirement plan, you will need to find a way to save, and/or invest to accumulate those much needed funds for your golden years.
There are many other ways to save or invest your money. Today, a typical savings account pays tiny interest percentages. You may pay more in monthly bank fees that what you would earn on their savings account.
The best thing about leaving your money in a savings account is that you will likely not lose your principle as it is protected by the FDIC, or Federal Deposit Insurance Corporation. You will not gain much, if at all, but there is very little risk of loss in this type of investment.
A better bet may be stocks, bonds, mutual funds, CD’s or certificates of deposit, or annuities. There are varying degrees of risk in these types of investment instruments. Of these CD’s would be the least risky, then mutual funds, annuities, bonds, and stocks would hold the highest degree of risk.
Do I need to hire a financial planner, or financial advisor?
If you ask, what is the average retirement income, you are likely someone that is looking to improve your current retirement plan, or perhaps you don’t have a retirement plan at all.
If you are someone that has little knowledge about finance, and investments, or if you feel you have too little time to devote to this important subject, then a financial planner, or financial advisor may be for you.
Even if you do have a lot of knowledge, and interest in this area, a true devoted expert with a good track record, and reputation could still be a good choice for you.
I would recommend however that you go with an advisor that works on a fee only basis. There are many advisors that work on commission.
These commission folks make money by putting you into certain investments like annuities, and may not have your best interest at heart. Fee only advisors provide a consultant role, where as commission based advisors are primarily salespeople.
Would you rather be consulted with, or sold to? It’s all about trust. Retirement planning is enormously important. You should interview 3 or 4 potential advisors. Be sure that they are reputable, and have all the professional designations.
Make sure the company they work for, if they don’t work for themselves, has a stellar reputation. Ask for testimonials. See if they will treat you as an individual, or try to service you with a broad brush. Stay away from the general approach.
Ask how they will make their money. Make them explain all their fees and commissions. Find out their investment philosophy. If they gloss over this part, kick them to the curb.
Educate yourselves as much as you can prior to meeting with your prospective financial planners. Remember, you don’t want a commission based, or a combination of fee based and commission based planner. You want a strict fee based advisor, or consultant.
What is the average retirement income is much more for those who simply plan. What you will need come retirement day, beyond everything else, is an income.
If you are able to save a good amount of money, that’s great, congratulations.
But, even if you have a large nest egg saved up, you will have to draw from it in order to live. You may live another 30 or 40 years beyond the time you quit work, and retire.
Many additional expenses can, and likely will raise their ugly head. If you haven’t figured out a way to generate an income without depleting your savings, it may not be long before you will be clamoring for help.
So, unless you have a solid job related, or government pension, I highly suggest you find a way to create an income that never runs out. How does one create an income without having a pension or federal retirement income, especially an income that never runs out of money or principal?
Best Retirement Income
We all need an income to replace the income, or at least most of it, that we had when we were working, once we are no longer working. The ideal income would be one where the principal that the income is derived from never goes away, and even better grows larger as time goes by.
Is this scenario possible? It is not only possible, but very plausible. In other words, it is real. Although you can also create an income with insurance annuities, as well as with dividend stocks, there is one investment that trumps all of the others.
Insurance annuities are not ideal, as you will have to provide a large sum of money to effect an income. You will have a steady income with this investment instrument. However, you lose control of your principal once you invest in annuities.
With some annuities you can recover some of your principal, but you will pay a large penalty in order to do so. Also, there is no chance of your large investment in annuities to grow with time.
Dividend stocks are a good retirement income source. Once again, with dividend stocks like annuities, you will have to provide a large sum of money to invest in these instruments in order to create an income.
A benefit of dividend stocks over annuities, is that you can liquidate some or all of your investment principal most anytime you wish. The downside risk is that if the underlying stock goes down, your dividend payout could decrease, and if the company’s profits disappear, the dividend may as well.
But, the worst that could happen with a dividend stock investment if the dividend goes away, you would have to sell your stock and possibly take a loss, which is likely not too bad. But, you can always buy another dividend stock, if you want, and create another income stream.
Part time jobs are common among retirement age folks. Being retired doesn’t necessarily mean to stop working altogether. Many people feel they have to continue working in order to supplement their social security income.
Others keep working to fill their time, or to stave off boredom. Today, with the advent of the internet, there are money making opportunities that are available from the convenience of the home computer or laptop.
These opportunities can provide additional income, and give purpose, and meaning to people in their later years.
This flexible option for retirees or semi retirees is also desirable in that your computer can be accessed from anywhere in the world with an internet connection.
So, if you want to spend your summers in say Minnesota, and your winters in Florida, you will have the ability to work online in both places.
Among the most popular, and viable internet opportunities is affiliate marketing. This enables you to represent online vendors such as Amazon or Ebay, and make a commission every time someone you send there makes a purchase.
The most reputable, and legitimate online company that provides education, and guidance in affiliate marketing is Wealthy Affiliate.
DRIPs are the absolute best, numero uno retirement income investment available, in my humble opinion. DRIP’s are dividend reinvestment programs.
What is the average retirement income for a DRIP investor, you may ask.
Many publicly held companies allow you to purchase their stock directly from the company. Often times this stock can be bought for very little, if any fees, both from the initial purchase, and any subsequent purchases.
Based on this benefit, you are immediately further ahead of the game versus having to go through a stock broker, and pay sometimes hefty commissions and transaction fees. These DRIP companies allow for the reinvestment of the dividends that they pay out.
This dividend reinvestment can be for the entire amount of the dividend, part of the dividend, or you can take the entire dividend as a payout. It is up to you. And you are not locked into the way you want to treat your dividend. You can change it at any time.
What makes this retirement investment so special is that it allows you to use the power of compound interest. By reinvesting the dividend, you buy more stock in the company.
Once you set that you want all or part of the dividend reinvested, this will happen automatically. You can then, if you choose, make optional purchases of additional stock.
Many of these DRIP programs can be started for as little as $50 USD. If you start this program early enough, you won’t have to put much additional money into it, to have a nice amount built up when you are ready to retire.
Of course, the more you can add to it, the more you will have. Even if the price of the stock dips, as long as the dividend remains, it will continue to purchase more shares of stock for you. The risks are that the company will lower or do away with their dividend.
If this happens, you always have the option of selling the stock and buying another DRIP stock. Also, when you go to sell, there are usually some standard fees involved, but not more than a standard stock investment, in most cases.
I strongly suggest that if you decide to buy a DRIP that you purchase more than one DRIP, if at all possible. You should purchase in different economic sectors, for instance, an insurance DRIP, a utility DRIP, and a REIT (Real Estate) drip, would give you some diversification without spreading yourself too thin.
What is the average retirement income for those who add dividend stocks and/or DRIPs to their portfolio will be likely significantly higher than for those who don’t.
You lose some of the power of the compound interest by buying more DRIPs, but, at the same time, you mitigate your risk. All you need to do is to monitor your DRIP stock to be sure that there are no major changes in the dividend payout or the price of the stock.
You should do your due diligence to determine what the selling fees are, prior to buying into the DRIP. Most DRIP stocks pay at least a 2% dividend, and some pay upwards of 10% or more.
Albert Einstein once said about compound interest: “Compound interest is the eighth wonder of the world. He who understands it, earns it, he who doesn’t pays it.”
Another great benefit of a DRIP stock is, when you are ready to retire, and start taking the dividend as a payout, you can take part for income, and reinvest part to keep your principal growing, so that you will have less worry about always having a sufficient income to live on.
You could for instance, take 75% as a payout, and keep 25% in to buy more stock. Or if you don’t need as much income, you could take say 50% out, and leave 50% in.
DRIPs are a great vehicle to purchase once you take your lump sum payout from any other retirement plan you may have. Buy some DRIPs and live off the interest.
I only wish that I had discovered DRIP stocks sooner. But, this investment is so good that even starting late should turn out great.
Whatever retirement vehicle, or vehicles you choose, you should get started now. Time is your greatest ally when it comes to retirement planning. With time and some discipline your retirement income funds will be there for you when you need them, and your retirement years can be the best time of your life.
What is the average retirement income for you?