What Is a Good Retirement Income for a Couple?

A good retirement income for a couple is not a universal figure but rather a highly personal determination. It is shaped by individual aspirations, desired lifestyles, and the financial resources available to support those choices. Establishing what constitutes an adequate income requires a thorough examination of anticipated expenses and potential revenue streams throughout retirement. This process helps couples define their financial goals and develop a strategy to achieve them, ensuring a comfortable and secure future.

Understanding Your Retirement Lifestyle and Expenses

Defining a “good” retirement income begins with a comprehensive understanding of a couple’s desired lifestyle and the associated expenses. While some costs may decrease in retirement, such as commuting expenses or work-related clothing, others, like leisure activities or healthcare, often increase. Housing expenses are a significant component of any budget, and in retirement, this could involve continuing mortgage payments, property taxes, or the costs associated with downsizing to a smaller home or relocating.

Food costs can remain stable or even increase if a couple plans to dine out more frequently or purchase specialty items. Transportation needs may shift from daily commutes to more leisure-oriented travel, necessitating budgeting for vehicle maintenance, fuel, or public transportation. Healthcare represents an important and potentially escalating expense for retirees, even with Medicare coverage, due to premiums, deductibles, co-payments, and the potential need for supplemental plans.

Discretionary spending on travel, hobbies, and social activities will largely dictate the “fun” part of a retirement budget. Couples planning extensive international trips or pursuing expensive hobbies will naturally require a higher income than those content with local activities. Inflation is another important factor to consider, as the purchasing power of money erodes over time. An average inflation rate of 2% to 3% annually can significantly impact the cost of living over a retirement period that could span 20 to 30 years or more.

Accounting for these fluctuating costs and the long-term effects of inflation is important to accurately projecting future financial needs. A detailed assessment of these categories allows couples to identify their specific financial needs. This foundational work helps establish a realistic income target.

Key Sources of Retirement Income

Couples draw retirement income from several primary sources, each with its own characteristics and rules. Social Security benefits represent a key component of most retirement plans in the United States. For married couples, Social Security provides options for spousal and survivor benefits, which can significantly enhance a couple’s overall income.

Pensions, particularly defined benefit plans, offer another reliable income stream, providing a predetermined payout for life based on factors like years of service and salary. While less common in the private sector today, many public sector employees and those in older companies may still receive these benefits. These plans provide a steady monthly income, which can simplify retirement budgeting. However, it is important to understand the specific terms, such as vesting schedules and survivor benefit options.

Investment accounts form a significant part of many couples’ retirement income strategies. Tax-advantaged accounts like 401(k)s and Individual Retirement Accounts (IRAs) are common, offering tax benefits for contributions and growth. Withdrawals from traditional 401(k)s and IRAs are taxed as ordinary income in retirement, while qualified withdrawals from Roth 401(k)s and Roth IRAs are tax-free. Withdrawals from these accounts before age 59½ may be subject to a 10% early withdrawal penalty, in addition to ordinary income taxes. Required Minimum Distributions (RMDs) begin at age 73 for most individuals, mandating withdrawals from most traditional retirement accounts to ensure taxes are paid on deferred earnings.

Taxable brokerage accounts, while not offering upfront tax advantages, provide flexibility as withdrawals are not subject to age restrictions or RMDs. Gains from selling investments in these accounts are taxed as capital gains, which can have different tax rates than ordinary income. Other potential income sources include part-time work, which can supplement income and provide engagement, or rental income from investment properties. Annuities, purchased from insurance companies, can also convert a lump sum into a guaranteed income stream for a specified period or for life.

Estimating Your Required Retirement Income

Estimating the required retirement income involves synthesizing anticipated expenses with potential income sources to arrive at a target figure. One common guideline is the “percentage of pre-retirement income” rule of thumb, which suggests aiming for 70% to 80% of your pre-retirement income to maintain your lifestyle. For instance, a couple earning $100,000 annually might target $70,000 to $80,000 per year in retirement income. This approach provides a quick estimate but does not account for individual variations in retirement spending habits, such as significant travel plans or reduced debt.

A more precise method is the “bottom-up budgeting” approach, which involves itemizing projected retirement expenses. This process begins by listing all anticipated monthly and annual costs, including housing, utilities, food, transportation, healthcare, insurance premiums, and discretionary spending like entertainment and travel. Summing these detailed expenses provides a more accurate and personalized figure for the couple’s annual income needs. This method allows for greater customization, reflecting unique lifestyle choices and financial obligations.

Once the total annual expense figure is determined, couples can evaluate how much of this will be covered by fixed income sources like Social Security and pensions. The remaining amount needs to be drawn from investment portfolios. The “4% rule” is a guideline for sustainable portfolio withdrawals. This rule suggests that a retiree can withdraw 4% of their initial portfolio value in the first year of retirement, adjusting that dollar amount for inflation in subsequent years, with a high probability of not depleting their savings over a 30-year retirement period.

For example, if a couple determines they need an additional $50,000 annually from their investments, the 4% rule suggests they would need a portfolio of $1,250,000 ($50,000 / 0.04). It is important to recognize that the 4% rule is a historical guideline and not a guarantee, as market conditions and inflation can vary. The “good” retirement income for a couple is a dynamic estimate, requiring periodic review and adjustment based on changes in personal circumstances, economic conditions, and investment performance.

Citations:
“Medicare Costs at a Glance.” Medicare.gov. Accessed August 24, 2025.
“Consumer Price Index.” U.S. Bureau of Labor Statistics. Accessed August 24, 2025.
“Retirement Benefits: Spouses.” Social Security Administration. Accessed August 24, 2025.
“Retirement Plans FAQs regarding IRAs.” Internal Revenue Service. Accessed August 24, 2025.
“401(k) Plans.” Internal Revenue Service. Accessed August 24, 2025.
“Retirement Topics – Required Minimum Distributions (RMDs).” Internal Revenue Service. Accessed August 24, 2025.
“The 4% Rule: How to Calculate It and Why It Matters for Retirement.” Investopedia. Accessed August 24, 2025.