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. In this case, the median income might be more helpful. Social Security is a major income source for most retirees, designed to replace about 40% of the average worker's pre-retirement income (and less than that for those with above-average earnings). The average monthly Social Security retirement benefit was recently $1,366, which amounts to $16,392 per year. If your earnings have been above average, you'll collect more than that -- up to a recent maximum monthly Social Security benefit of $2,687 for those retiring at their full retirement age. The median nest egg for those aged between 65 and 74 was recently about $148,000. How much retirement income do you need? You might work a few more years, too, delaying retiring. The $16,122 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings.
If you’ve reached your mid to late 50s, it’s time to start making some concrete retirement plans. It’s important to start planning out your retirement at least 5 to 10 years in advance, because you may need to do quite a bit of research to find just the right options for your dream retirement.
Write a bucket list
Retirement is the time when you’ll finally get to do all the things you’ve always wanted to do, but didn’t have the time or money to manage. So pull out a piece of paper and a pen and start writing down exactly what you want to do. Get as specific as you can for each item: don’t just write “travel,” write “rent an RV and visit every state in the continental US,” “take a cruise around the world,” “tour the capitals of Europe,” or “explore South America by hot air balloon.” Don’t worry about practicality or price for now; just let your fantasies fly.
Narrow it down
Once you’ve written down every goal and dream you can think of, stick the bucket list in a drawer for a day or two and then come back to it with a fresh mind. Look over your list and number it by priority: write a one by the item that you most want to do, write a two by the next most important item, and so on. You probably won’t get to do everything on your list, but by prioritizing you can at least make sure that you hit the most important ones.
Consider your resources
Now is the time to start getting practical. First, review your sources of retirement income. Pull up the statements for your 401(k) and IRA accounts, and add up how much money you have in there. Look at your Social Security statement to see how much your monthly benefit will be. Pull up statements for any pensions or other sources of income that you’ll enjoy once you retire. Then, add it all up. What you’re looking for is a realistic figure for how much you’ll have coming in on a monthly and yearly basis (to calculate income from your retirement savings accounts, start by assuming that you can take 3% to 4% per year without exhausting your accounts — and don’t forget RMDs).
Add up expenses
Now that you know how much money will be coming in, you need to also figure out how much will be going out. For now, you want to include only your basic day-to-day expenses; don’t worry about the special expenses from your bucket list items. What you’re looking for is the minimum expenses you’ll face in retirement even if you don’t do any of that fun stuff. You can use your current expenses as a starting point and reduce or remove anything that will no longer be an expense…