What Is the Average Income of a Retired Couple?

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on January 19, 2024

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Average Income of a Retired Couple

The average income of an individual 65 and over was $50,290 in 2022 according to the latest United States Census Bureau.

Considering a retired couple (two people), and assuming both individuals have the median income for their age group, the total household income would be $100,580.

However, this may not be entirely accurate as income dynamics can be different for couples, with often one partner having more or less income than the other.

It's important to note that income can vary widely among retired couples based on factors such as retirement savings, pensions, and Social Security benefits.

Additionally, different countries and states have varying levels of social security benefits, which can greatly impact retirement income.

Apart from individual factors, broader economic factors also influence retirement income. These include economic prosperity, cost of living, taxation rates, the proportion of elderly population, and the extent of income inequality.

Gender Gap in Retirement Income

According to National Institute on Retirement Security, women aged 65 and older typically earn 25% less than their male peers. This income disparity grows with age, reaching a 44% difference in favor of men by the time they reach 80 years old and beyond.

As a result of this widening gap, women over 65 are 80% more likely to experience poverty compared to men, with women aged 75 to 79 being three times as likely to fall into poverty compared to men of the same age group.

The gender income gap has serious implications for the average income of retired couples.

If one partner, typically the woman, has significantly lower retirement savings, the couple's overall income may not adequately cover their needs, particularly if the male partner predeceases his female partner, which is common given women's longer life expectancy.

Influencing Factors on the Average Income of a Retired Couple

Age of Retirement

The age at which a couple retires can significantly influence their average income in retirement. Those who retire early might receive less from Social Security or pensions, as these are often calculated based on the number of years worked.

Delaying retirement can allow couples to accumulate more savings and increase their Social Security benefits.

Lifespan After Retirement

Life expectancy plays a critical role in determining a retired couple's income. Living longer means that retirement savings need to stretch over a more extended period.

With the rise in life expectancy, many retirees risk outliving their savings, leading to a reduced average income in the later years of retirement.

Pre-retirement Income Levels

The income level before retirement is another crucial factor. Higher earners typically receive more from Social Security and are more likely to have substantial savings and pensions, leading to a higher average retirement income.

Lifestyle Choices

Retirement doesn't look the same for everyone. Some choose a quiet life in a paid-off home, while others travel the world. These lifestyle choices can dramatically affect a retired couple's average income requirements.

Health Care Costs

Health care costs can significantly eat into a retired couple's income. As we age, health expenses tend to rise, and for some, long-term care may be needed. Couples must account for these potential costs in their retirement planning.

Inflation

Finally, inflation can erode purchasing power over time. A retired couple might have an income that seems sufficient today, but with rising prices, their income might not stretch as far in future years.

It's crucial for retirement planning to consider the potential impacts of inflation.

Influencing Factors on the Average Income of a Retired Couple

Income Sources of a Retired Couple

Social Security Benefits

Overview

Social Security benefits are a primary income source for many retired couples. The Social Security Administration provides benefits to retired workers who have paid into the system during their working years, offering a baseline of income in retirement.

How Social Security Benefits Are Calculated

The amount a couple receives from Social Security depends on their lifetime earnings, the age at which they start claiming benefits, and their marital status. The benefit amount is calculated based on the 35 highest-earning years of a person's career.

If you claim benefits before your full retirement age (which varies based on your birth year), your benefits will be permanently reduced. Conversely, if you delay claiming past your full retirement age, your benefits will increase until age 70.

Retirement Savings Accounts

Types

Retirement savings accounts such as 401(k) plans and Individual Retirement Accounts (IRAs) are vital income sources for retirees.

A 401(k) is provided by employers, while IRAs can be opened by individuals. Contributions to these accounts are often tax-deductible, and earnings grow tax-deferred until retirement.

How Retirement Savings Contribute to Average Income

The income from retirement savings accounts depends on the amount saved and the withdrawal strategy used.

The commonly recommended withdrawal rate is 4% of the initial balance, adjusted each subsequent year for inflation. However, market conditions and personal circumstances can affect this strategy.

Pensions

Explanation and Prevalence

A pension is a retirement plan where an employer contributes money to a pool of funds set aside for a worker's future benefit. The funds are invested on the employee's behalf, providing a regular income in retirement.

However, pensions have become less common as many employers have shifted to 401(k) plans.

Impact on Average Income

For those lucky enough to have a pension, it can significantly boost average retirement income. Pension benefits vary widely but can provide a reliable source of fixed income throughout retirement.

Investments

Common Types

Common types of investments include stocks, bonds, mutual funds, and real estate. These assets can generate income through dividends, interest, rent, or capital gains.

Role in Income Generation

Investments can play a significant role in generating income in retirement. The income generated can depend on market conditions and the types of assets held. A well-diversified portfolio can provide a mix of growth (from stocks) and income (from bonds and dividends).

Part-Time Work or Consultancy

Statistics on Retirees Who Continue Working

According to the latest data from Pew Research, 19% of individuals aged 65 and above were either employed or actively seeking employment, in contrast to the 10 percent recorded in 1985. Many retirees choose to work part-time or as consultants in their former fields.

How This Affects Average Income

Continuing to work can significantly boost a retired couple's average income. It not only provides additional money but also allows couples to delay claiming Social Security benefits, potentially increasing their future benefits.

Income Sources of a Retired Couple

How the Average Income of Retired Couples Affects Lifestyle

Income Needed for Basic Needs vs Luxury

The income a retired couple needs largely depends on the lifestyle they plan to lead. Basic needs such as housing, food, and healthcare must be met first. However, for comforts beyond the basics, like travel, dining out, or pursuing hobbies, more income is needed.

Role of Average Income in Determining Retirement Lifestyle

The average income during retirement plays a crucial role in determining a couple's retirement lifestyle. It can dictate where they live, the experiences they can afford, and their overall quality of life.

How It Influences Travel, Hobbies, and Other Retirement Activities

Income in retirement influences what retirees can do with their free time. Those with a higher income can afford to travel more extensively, pursue costly hobbies, or participate in more leisure activities.

Those with lower incomes may need to find less expensive pastimes or limit their travel.

Preparing for Retirement: Strategies to Increase Income

Financial Planning and Saving for Retirement

Financial planning is vital for a comfortable retirement. This means setting aside money regularly, investing wisely, and aiming to increase earnings over time. Starting early and taking advantage of compound interest can greatly increase retirement savings.

Diversifying Income Sources

Diversification is another important strategy. This means having a mix of income sources in retirement, such as Social Security, retirement savings accounts, other investments, and part-time work. This can provide a safety net if one source of income diminishes.

Consideration for Continued Part-Time Work or Consultancy

Continuing to work part-time or as a consultant during retirement can not only provide extra income but also keep retirees mentally active and socially connected. It's crucial, however, to find a balance between work and leisure to fully enjoy the retirement years.

The Bottom Line

Understanding the average income of a retired couple requires exploring various sources of income, including Social Security benefits, retirement savings accounts, pensions, investments, and part-time work.

The lifestyle, location, and healthcare needs of the couple can significantly affect their average income. Additionally, gender income disparities and the age at which a couple retires can also play crucial roles.

Knowing the average income of retired couples is essential for retirement planning. It provides a benchmark that future retirees can use to estimate the income they'll need to maintain their desired lifestyle.

It also underscores the need for saving, investing, and planning to ensure financial comfort in later years.

The more you understand about retirement incomes, the better you can plan for your future. Consider consulting with a financial advisor or retirement planning service to help you navigate your path to a comfortable and fulfilling retirement.

What Is the Average Income of a Retired Couple? FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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