Retirement Income for Couples in the United States: Understanding Averages vs. Medians

Understanding the financial situation of retired couples in the United States is crucial for developing a sound financial plan. Financial strategists often refer to the data provided by the United States Census Bureau to estimate the average and median income of elderly couples. This article delves into the nuances of these figures and their implications for retirees.

Average vs. Median: Key Differences

When discussing income statistics, it is essential to differentiate between the average and the median. The average income is calculated by summing all the income figures and dividing by the total number of individuals or households. Conversely, the median income is the middle value in a sorted list of income numbers. This means that half of the individuals or households earn less than the median, and the other half earn more.

Recent Data and Trends

According to the United States Census Bureau, the average income for individuals aged 65 and over in 2021 was $47,620. This figure can be misleading when considering the total household income for a couple, as it doesn't account for the skewing effect of high earners. For a retired couple, if both individuals have the median income for their age group, their total household income would be $95,240.

However, based on 2022 data from the U.S. Census Bureau, the average household income for individuals over 65 is approximately $75,254. This is notably higher than the median of $47,620. The difference between these two figures can be attributed to a few high-income earners skewing the average up, while the median remains a more accurate representation of the middle income level.

Calculating a ‘Good’ Retirement Income

In the context of retirement planning, the terms average and median are often used interchangeably, but they have different implications. For instance, a good retirement income might be calculated as 67% of the median income in 2024, which would be approximately $31,796 for a couple (60% of the median income in 2025, or approximately $28,572).

Common Retirement Expenses

The average retiree household expenses are $50,220 per year, as cited by the Bureau of Labor Statistics. This figure has remained relatively stable over the past few years, with a couple of previous years showing similar values around $48,000. Social Security benefits make up a significant portion of retiree income, but they often fall short of covering the total expenses.

According to the Social Security Administration, the typical senior couple receives about $2,739 per month, or approximately $32,868 per year. While this amount is substantial, it is still insufficient to cover their average expenses.

Using Median Income for Retirement Planning

The disparity between average and median income underscores the importance of using the median income for retirement planning. The median provides a better representation of the typical retiree's income, which can be more relevant for financial planning purposes. For instance, using a median income of $50,000 and an average income of $75,000 can give a more realistic picture of retirement income in America.

Conclusion

Understanding the distinction between average and median income is crucial for retirees and those planning for retirement. The median income offers a more accurate representation of typical retirees' financial situation, which can help in formulating a realistic financial plan. By using the median income, planners can better allocate resources and plan for unforeseen expenses that may arise in retirement.