What Is a Good Annual Retirement Income? Your 2025 Complete Guide

Ready to retire but not sure if your savings will cut it? Let’s break it down!

Have you been stashing away cash for years, but still wonder if it’ll be enough when you finally hang up your work boots? You’re not alone! The question of “what is a good annual retirement income” keeps many Americans up at night As someone who’s spent countless hours researching this topic, I’m excited to share what I’ve learned to help you determine if your retirement nest egg is on track

The truth is there’s no magic number that works for everyone. Your perfect retirement income depends on several factors unique to you—where you live, your health and the lifestyle you want to enjoy. But don’t worry! I’ve got some solid guidelines to help you figure out what’s right for YOU.

The Current State of Retirement Income in America

Before we dive into what you should aim for, let’s look at where most Americans stand today:

According to the United States Census Bureau, as of 2025, the average retirement income for individuals 65 and older looks like this:

Notice something interesting? The median income (the middle point where half earn more and half earn less) is significantly lower than the mean (average) income. This happens because some retirees with very high incomes pull the average up, which is why the median is often considered a more realistic measure for most Americans.

Looking at spending habits, the Bureau of Labor Statistics found that U.S. households led by someone 65 or older spent an average of $64,326 in 2023. But here’s the kicker—a 2022 survey by the Employee Benefit Research Institute discovered that 68% of retirees actually spend less than $40,000 per year!

The Famous “80% Rule”—Is It Right for You?

You’ve probably heard financial experts suggest that you need about 80% of your pre-retirement income to maintain your lifestyle after retiring. Ashley Weeks, vice president of wealth strategies for TD Wealth, confirms this rule of thumb but adds that it’s “a pretty broad stroke.”

Why 80% and not 100%? Well, some expenses typically decrease after retirement:

• No more commuting costs
• Work clothes become optional (hello, pajama days!)
• Lunches out with colleagues disappear
• You’re not actively saving for retirement anymore
• Taxes might be lower

But let’s be real—other expenses might increase:

• Healthcare (a big one!)
• Travel and leisure activities
• Hobbies you now have time for
• Possibly helping family members

Joe Conroy, a financial advisor, puts it perfectly: “You can have a great retirement on $5,000 a month, and you can have a great retirement on $50,000 a month.” It really depends on YOU.

How Geography Impacts Your Retirement Needs

Where you call home during retirement can dramatically impact how far your dollars stretch. According to a 2023 GOBankingRates analysis, the annual cost to retire comfortably varies by as much as $66,000 between states!

Hawaii takes the crown as the most expensive state, requiring a whopping $121,228 annually for a comfortable retirement. On the flip side, Mississippi is the most budget-friendly at just $55,074 per year.

Here’s a snapshot of annual retirement costs in selected states:

These figures include basic expenses like food, shelter, transportation, healthcare, and utilities, plus a 20% “comfort buffer.”

So if you’re struggling to hit your retirement savings goals, maybe consider retiring to a lower-cost state? Just sayin’!

Breaking Down Your Retirement Income Sources

Most retirees don’t rely on just one income stream. Instead, they piece together various sources to create their total income. Understanding these sources can help you plan better:

1. Social Security

Almost 90% of Americans 65 and older receive Social Security benefits. As of December 2024, the average monthly benefit for retired workers is $1,975, which equals $23,700 annually. Not enough to live on for most people, but it’s a solid foundation to build upon.

Social Security represents about a third of the income received by people older than 65, making it a crucial piece of most retirement puzzles.

2. Retirement Accounts

Your 401(k), IRA, or other retirement accounts will likely provide a significant portion of your income. The conventional wisdom suggests withdrawing about 4% of your savings annually to avoid running out of money.

With this rule, a $1 million nest egg would generate about $40,000 per year. But as Nick Hughes, a certified financial planner, points out, “The problem is that the 4% rule doesn’t really account for taxes.”

The Vanguard study on retirement savings shows where the average American stands:

3. Pensions

Traditional pensions are becoming rare, but if you’re lucky enough to have one, it can provide reliable monthly income. Government employees, teachers, and those in certain industries are more likely to receive pension benefits.

4. Part-Time Work

Many retirees choose to work part-time, both for income and fulfillment. In fact, 62% of working Americans plan to continue working during retirement in some capacity, according to a recent Schroders study.

But be careful about relying too heavily on this option. As Ashley Weeks cautions, “Most folks just assume ‘I can use part-time work as a stop-gap.’ At some point, we all won’t physically be able to go to work.”

5. Annuities

Annuities can provide guaranteed income for life, which many retirees find comforting. They’re essentially a contract with an insurance company where you pay a lump sum in exchange for regular payments.

So What IS a Good Annual Retirement Income?

After all this, you’re probably still wondering: what’s the actual number I should aim for?

Let me break it down into three tiers based on what I’ve learned:

Basic Comfort: $40,000-$60,000 annually

At this level, you can cover basic needs and some modest luxuries in most parts of the country (except high-cost areas like Hawaii or California). This works well if:

• You’ve paid off your mortgage
• You live in a low-to-moderate cost area
• You have good health insurance coverage
• You enjoy simple pleasures and don’t travel extensively

Middle Comfort: $60,000-$90,000 annually

This range provides more flexibility and comfort for most retirees across the country. You can:

• Travel regularly
• Pursue hobbies that cost money
• Help family occasionally
• Handle unexpected expenses more easily
• Live in moderately expensive areas

High Comfort: $90,000+ annually

This level allows for few financial constraints in most parts of the country. You can:

• Travel extensively, including international trips
• Live in expensive areas
• Help family members financially
• Pursue expensive hobbies
• Handle medical expenses with less stress

Remember that these are generalizations! Your personal situation might require adjustments up or down.

Practical Steps to Determine YOUR Number

So how do you figure out what’s right for YOU? Here’s my simple process:

1. Track your current spending for at least 3 months. This gives you a baseline.

2. Adjust for retirement changes:

   • Subtract work-related expenses
   • Add more for healthcare (many experts suggest budgeting $300,000 for a couple’s healthcare in retirement)
   • Add more for hobbies/travel if that’s in your plans
   • Subtract mortgage payments if you’ll have paid off your home

3. Multiply your monthly need by 12 to get your annual requirement.

4. Apply the “4% rule” to see how much you need saved:

   • Annual income needed ÷ 0.04 = Approximate savings required
   • Example: $60,000 ÷ 0.04 = $1,500,000 needed

5. Factor in Social Security by creating a my Social Security account at ssa.gov to get your estimated benefit, then subtract this from your needed income.

6. Adjust for your location using the state-by-state cost data we discussed earlier.

Common Retirement Income Mistakes to Avoid

In my research, I’ve noticed these common mistakes people make when planning their retirement income:

1. Underestimating longevity – People are living longer! Plan for 30+ years in retirement if you retire at 65.

2. Forgetting about inflation – What costs $50,000 today might cost $67,000 in 10 years with just 3% inflation.

3. Ignoring tax implications – As Christopher Abts, a financial advisor, notes, “How you take income in retirement will absolutely have an impact on the taxes you pay.” Traditional 401(k) and IRA withdrawals are taxable!

4. Not planning for healthcare costs – Medicare doesn’t cover everything, and long-term care costs can be devastating without proper planning.

5. Being too conservative with investments – While protection is important, being too conservative can mean your money doesn’t grow enough to last.

Final Thoughts: Your Retirement, Your Number

There’s no one-size-fits-all answer to what makes a good retirement income. The most important thing is that YOUR income supports the retirement lifestyle YOU want.

Christopher Abts sums it up nicely: “No one wants to retire to a lower lifestyle.” Your goal should be maintaining the quality of life you desire, whatever that means to you.

I believe the best approach is to work with a financial advisor who can help you create a personalized plan. As Abts says, “My hope is that they seek professional guidance before they pull the trigger.”

Remember, retirement planning isn’t just about a number—it’s about creating the freedom to enjoy the life you’ve worked so hard to build!

What’s your retirement income goal? Have you started planning yet? I’d love to hear your thoughts in the comments!

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Disclaimer: This article is for informational purposes only and should not be considered financial advice. Always consult with a qualified financial professional before making important financial decisions.

A “good” monthly retirement income varies significantly, but a common benchmark is 70–80% of your pre-retirement income to maintain your lifestyle. For 2025, U.S. Census Bureau data shows the average retirement income for an individual is about $5,000 per month, and for a couple, it is around $8,300 per month, though median incomes are lower.

Yes, a retired couple can potentially live on $60,000 a year, but it is highly dependent on their location, healthcare costs, lifestyle, and debt. A paid-off home and minimal debt, alongside responsible spending on essentials like food and transportation, make this income feasible.

Yes, $80,000 can be a good retirement income, but its sufficiency depends on factors like your pre-retirement income, lifestyle, expenses, location, and whether you are a single person or a couple.