What Is a Good Monthly Retirement Income for a Couple?

Determining a “good” monthly retirement income for a couple is highly personal, shaped by individual desires, health, and carefully laid plans. There is no universal figure, as each retirement journey is distinct. A sufficient income supports a couple’s envisioned lifestyle throughout their later years. This article provides a framework to help couples assess and project their specific retirement income needs.

Understanding Your Retirement Lifestyle

The definition of a suitable retirement income is intrinsically linked to the lifestyle a couple aims to enjoy. Monthly spending in retirement is influenced by several variables, beginning with geographic location. The cost of living can vary significantly across regions, impacting expenses for housing, utilities, and services.

A couple’s housing situation also plays a substantial role in their retirement budget. Whether a mortgage will be fully paid off by retirement, or if ongoing rent, property taxes, insurance, and maintenance costs will remain, significantly shapes monthly outlays.

Healthcare expenses represent another considerable and often underestimated cost for retirees. These include Medicare premiums, supplemental insurance, prescription drugs, and other out-of-pocket medical expenses. Estimates suggest these costs can be substantial over a typical retirement, excluding long-term care.

Travel, hobbies, dining out, and other recreational activities directly impact required income. Transportation costs, including car payments, insurance, fuel, and public transit, also factor into the budget. Everyday living costs like groceries, utilities, and personal care items remain ongoing expenses. Inflation erodes purchasing power over time and must be considered when projecting future income needs. Open communication between partners about their shared vision for retirement is fundamental to accurately mapping these financial considerations.

Core Components of Retirement Income

A couple’s monthly retirement income typically draws from various sources, each contributing to their overall financial security. Social Security benefits often form a foundational component, with the amount an individual receives largely based on their work history, earnings record, and claiming age. For couples, Social Security also includes provisions for spousal and survivor benefits. Claiming benefits at an individual’s full retirement age, which is 67 for those born in 1960 or later, results in 100% of their primary insurance amount.

Employer-sponsored retirement plans represent another significant income stream. Defined benefit plans, commonly known as pensions, provide a guaranteed monthly income based on years of service and salary. Defined contribution plans, such as 401(k)s and 403(b)s, accumulate savings over a career, which are then typically withdrawn systematically to provide monthly income during retirement. These accounts grow tax-deferred, with taxes paid upon withdrawal.

Individual Retirement Accounts (IRAs) also serve as important vehicles for retirement savings. Traditional IRAs allow for tax-deductible contributions, with earnings growing tax-deferred until taxed upon withdrawal. Roth IRAs, funded with after-tax dollars, offer tax-free withdrawals in retirement, provided certain age and holding period conditions are met.

Beyond these primary retirement vehicles, other savings and investments can supplement a couple’s income. Taxable brokerage accounts, certificates of deposit (CDs), and standard savings accounts offer additional liquidity and income potential. Real estate can also serve as an income source, either through rental properties or the proceeds from selling a primary residence to downsize. Some retirees may also choose to engage in part-time work or utilize annuities, which are insurance contracts designed to provide a steady income stream for a specified period or for life.

Calculating Your Monthly Income Target

Arriving at a specific monthly income target requires a practical, step-by-step approach that integrates personal lifestyle aspirations with financial realities. The first step involves projecting current expenses to establish a baseline. Couples should create a detailed budget of their current monthly spending, categorizing expenses as essential and discretionary. It is important to consider how certain expenses might decrease in retirement, while others, like healthcare or leisure activities, may increase.

The next step is to adjust this current budget to reflect the desired retirement lifestyle. This involves modifying spending patterns to align with your vision, such as allocating more for travel or less if a mortgage is paid off.

Accounting for inflation ensures purchasing power is maintained over time. To project future income needs, couples can apply an assumed inflation rate, typically ranging from 2% to 3% annually. This adjustment illustrates the significant impact of rising costs over a prolonged retirement period.

Considering taxes in retirement is another essential aspect of determining a gross income target. Social Security benefits may also be subject to federal income tax, depending on combined income thresholds. Accounting for these potential tax liabilities is important, as they will reduce a couple’s net spending power.

Factoring in couple-specific considerations, such as “economies of scale,” further refines the income target. While some costs are per person, many household expenses do not simply double for two individuals. This means a couple’s combined income needs may be less than twice that of a single retiree. Joint financial planning and continuous communication between partners are paramount to ensure alignment with the projected income target.

Finally, summing all adjusted and projected expenses provides a personalized target for gross monthly income. While common rules of thumb, like replacing 70% to 80% of pre-retirement income, can guide, they are broad generalizations. A detailed, customized calculation based on a couple’s unique circumstances offers a more accurate target for a comfortable retirement.