Deciding to retire is no small matter. There are many factors to consider, including whether you’ll be able to pay your bills after leaving the workforce.
“The standard rule of thumb is that you want to have 80% of preretirement income,” says Ashley Weeks, vice president and wealth strategist for TD Wealth in Greenville, South Carolina. While a rule of thumb can be a good starting point for workers to consider, “That’s a pretty broad stroke,” he adds.
Financial experts are quick to point out that there are no hard-and-fast rules when it comes to retirement.
“You can have a great retirement on $5,000 a month, and you can have a great retirement on $50,000 a month,” says Joe Conroy, financial advisor and owner of Harford Retirement Planners in Bel Air, Maryland.
However, before you retire, understand what defines a good retirement income for you and where that money will come from.
[Read: 10 Essential Sources of Retirement Income]
Defining a Good Retirement Income
Determining what a good retirement income may not be as hard as you think.
“I find that the majority of people have a good handle on how much they need,” says Christopher Abts, a financial advisor with Prime Capital Financial in Reno, Nevada. That’s because most retirees will have a budget in retirement that is similar to what they spent while working. “No one wants to retire to a lower lifestyle,” Abts says.
Some work-related expenses, such as commuting costs, lunches out and job-appropriate clothing, will be cut from a budget, but retirees often have the same housing and utility bills. Additional expenses may include travel, new hobbies and entertainment costs.
“It’s all relative,” says Nick Hughes, a certified financial planner with Visionary Horizons Wealth Management in Chattanooga, Tennessee. What could be sufficient retirement income for one household could fall far short in another. “It’s going to vary based on where you (live) in the country,” Hughes says.
It also depends on where you are in your retirement. Newly retired people may spend more as they travel and pursue dreams put on hold during their working years. By mid-retirement, spending may be reduced as retirees settle into a slower pace of life. Then, near the end of retirement, costs may rise again as older individuals require more health care and perhaps long-term care.
Workers may be able to calculate how much income they need, but consulting a financial advisor before retirement may provide a more accurate estimate and peace of mind.
“My hope is that they seek professional guidance before they pull the trigger,” Abts says.
[Read: The Most Tax-Friendly States for Retirees]
Average Monthly Retirement Income and Spending in 2026
While every retiree will have unique income needs, considering the national average can help with planning.
The Bureau of Labor Statistics tracks consumer spending through its Consumer Expenditure Surveys. While 2026 numbers aren’t available yet, the latest figures from 2024 show the following averages for U.S. households headed by someone age 65 or older:
— Income (before taxes): $67,462
— Expenditures: $61,432
However, most retiree households spend far less than this amount. The 2024 Spending in Retirement Survey by the Employee Benefit Research Institute polled approximately 3,600 American retirees between ages 62 and 75 and found the vast majority spend less than $4,000 a month.
| Monthly Spending | Percentage of Retirees |
| Less than $1,000 | 17% |
| $1,000 – $1,999 | 28% |
| $2,000 – $2,999 | 21% |
| $3,000 – $3,999 | 14% |
| $4,000 – $4,999 | 8% |
| $5,000 – $5,999 | 5% |
| $6,000 or more | 7% |
5 Common Sources of Retirement Income
Once you have an idea of how much you will spend in retirement, you’ll need to determine where that money will come from. A financial advisor may be able to help.
“Our job is to figure out how to get $5,000 in the bank at the start of each month,” Conroy says.
Weeks says there are five main buckets from which retirees often pull money:
— Social Security
— Investment portfolio
— Annuities
— Part-time employment
— Pensions
Retirees may also generate income through rental properties or tapping into the equity of their homes through a reverse mortgage.
Traditional pensions are a relatively rare employment benefit nowadays. However, nearly 90% of people age 65 and older receive Social Security, according to the Social Security Administration. The average monthly benefit for retired workers in January 2026 was $2,071.
That equals an annual income of $24,852, which may not be enough to sustain a household. But don’t expect to keep working indefinitely for extra income.
“Most folks just assume ‘I can use part-time work as a stop-gap,'” Weeks says. “At some point, we all won’t physically be able to go to work.”
This is why saving for retirement is crucial during working years. Having funds in a 401(k), IRA or other account can help supplement Social Security income and ensure older Americans still have adequate income even after they stop working.
[Read: How to Start Investing and Saving for Retirement With Little Money]
Turn Savings into Cashflow
Converting savings into income isn’t as simple as making withdrawals whenever money is needed. For one, retirees need to limit distributions to an appropriate amount to ensure they don’t run out of cash in retirement.
One common rule of thumb is to take out 4% of savings each year. For someone with a $1 million nest egg, that would mean $40,000 in income annually. If a person had only saved $500,000, that would translate to $20,000 per year. “The problem is that the 4% rule doesn’t really account for taxes,” Hughes says.
Taxes are another significant factor to consider when converting savings into a regular cash flow. “How you take income in retirement will absolutely have an impact on the taxes you pay,” Abts says.
Many people have money in traditional 401(k) plans and IRAs. Withdrawals from these accounts are taxable, and at age 73, retirees must begin taking required minimum distributions, known as RMDs. These can substantially increase a retiree’s tax bill.
Converting money from traditional to Roth accounts before retirement is one way to sidestep this problem since withdrawals from Roth accounts are tax-free. However, you must pay taxes at the time of the conversion.
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What Is a Good Monthly Income in Retirement? originally appeared on usnews.com
Update 03/31/26: This story was published at an earlier date and has been updated with new information.