Why You Should Not Care about the Average Retirement Income People Receive

by Neal Frankle, CFP ®

Every day, people ask me what the average retirement income is. When they ask this question, I get scared. Very scared. Why? Because it’s the wrong question to ask and the wrong focus to have.

I believe that people ask this question so they can compare themselves to that average (currently about $30,000 a year). If they have (or will have) more than the average retirement income, they feel great. If they have less, they feel bad. Neither reaction is appropriate.

The average income for retired people today is irrelevant. What matters is how much will it cost you to retire during the years that you plan to be retired, and can you afford it? Those are the only important questions when you think about retirement planning.

Let me share with you a few statistics that really scared the heck out of me. This illustrates how unclear many folks are when they think about their financial future. I recently read in Financial Planning magazine that 83% of those nearing retirement are confident that they and their spouse agree on how to spend their retirement savings. But 56% had no clue as to how much income they would have in retirement. Many people spend more time trying to calculate fuel economy than they do trying to calculate their financial future. Do you see how absurd that is?

They’re confident about how to spend money, but they don’t know how much money they’ll need to retire. How could you be confident that you’ll spend your money on a trip to France if you aren’t sure how you’re going to pay for it? What am I missing? Has reasoning taken a vacation?

OK. So let’s get back to the main point. How do you avoid this average retirement income crisis?

I’ve boiled it down to five steps:

1. Stop worrying about post retirement average income. It’s meaningless to you.

2. Focus on knowing how much it costs you to live now and how much it will cost you to live when you retire.

3. Estimate what your retirement income will be and make sure you have the proper investments to create the most retirement income possible.

4. connect with me..

5. Be flexible. If you won’t have the income you’ll need, you can either work a bit longer (or part-time), cut back on your spending now and in the future, or a combination of both.

Before I saw this statistic about people being overly confident about their retirement, I thought people were just frightened. Now I realize that half the people out there just don’t know and don’t bother to find out what they’ll need in the future. Don’t be one of them.

If you have a spouse or partner, sit him down and explain how serious this is. Make sure you both hammer out a plan for the future and know exactly how you’re going to pay for it.

So, here’s your homework assignment for the weekend: Ask your spouse to explain how the two of you are going to afford to retire. If he doesn’t know, ask him what he wants to do about it.

Have you done your planning? Did your spouse go along with you, or was it a struggle to get him/her to join the process?

Ready for some extra credit? Check out these important posts:

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{ 2 comments… read them below or add one }

Roshawn @ Watson Inc October 3, 2010 at 5:38 PM

Thanks for linking to my guest post at Frugal Dad! Kind Regards,



Khaleef @ KNS Financial October 1, 2010 at 7:23 AM

Good points! Yeah, I’m just as dumbfounded as you are about those survey results! But that illustrates how most Americans only focus on their wants instead of developing a logical, reasonable plan.


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