How to Invest for Retirement. For 99% of our existence on earth, we lived in tribes. If you follow these three steps toward investing for retirement -- building up a safety net, living below your means and investing the difference in low-fee ETFs, and developing your passions -- your golden years could be your most enjoyable yet. Because everyone in the tribes was necessary for survival, the hard times were shared -- everyone ate a little less. Live below your means and invest the difference Our ancestors had a built-in way to ensure they didn't overconsume. First, we have to live below our means. In terms of where to put your money, I suggest: Contributing whatever you need to in order to receive the maximum "match" for your employers 401(k). What he's found is that happy retirees enter retirement with an average of 3.6 core pursuits, while unhappy ones have fewer than two. Follow these three steps -- building up your own safety net, living below your means and investing the difference, and pursuing your passions -- and it will be hard not to enjoy a comfortable and engaging retirement. The Motley Fool has no position in any of the stocks mentioned.
I’m living so far beyond my income that we may almost be said to be living apart. — E. E. Cummings
You can’t live beyond your income for very long without getting into trouble. It’s natural to look around at our neighbors and compare ourselves to them: Are we doing as well or better than they are? We can have the same questions in retirement, wondering how much retirement income our peers are receiving.
It’s helpful to know what average retirement incomes are, but the information has its limits, because each of us is in a different situation, with different needs. Let’s take a look at average retirement income, what income you are likely to need in retirement, and how you might generate additional dollars in your later years.
Average retirement income
First off, know that average income might not be the number you really want to know. Imagine, for example, five people, with incomes of $15,000, $20,000, $25,000, $30,000, and $100,000. Their average income (which can also be referred to as their “mean” income), is $38,000. But clearly, fully four of them earn considerably less than that, making it not a very representative number. In this case, the median income might be more helpful. That’s the middle number, when you list the five in ascending or descending order: $25,000.
According to recent government data, below are the average and median incomes for households of different ages:
Head of Household
Average Annual Income
Median Annual Income
Ages 65 to 69
Ages 70 to 74
Ages 75 and older
Source: U.S. Census Bureau, Current Population Survey, 2016 Annual Social and Economic Supplement.
Not surprisingly, the fact that a relatively small number of people have high incomes gives the chart higher averages than medians. Thus, more households aged 75 and older are living with incomes near $46,000 than ones near $63,000. Another thing to notice is how incomes tend to fall over time. That can make it difficult for those living on these fixed sums. Some costs in retirement do fall over time — you might travel less and go out to eat less as you enter your 80s, for example — but other costs, such as healthcare expenses, can rise.