Personal Finance

Here's Exactly How Much Income The Average Boomer's Retirement Accounts Will Provide

Christy Bieber

Published: December 16, 2024 8:49 am

Most Baby Boomers will have two primary sources of income in retirement. The first is Social Security, which provides benefits based on how much income you earned (and paid Social Security taxes on) during your working life. The second is your retirement investments.

Key Points from 24/7 Wall St.:

• The median retirement account balance for Baby Boomer workers is $194,000.
• This would produce only around $7,178 to $7,760 in annual retirement income.
• Baby Boomers will need more than the average if they want a comfortable retirement.
• Also: Take this quiz to see if you’re on track to retire (Sponsored)

Most people can’t live on Social Security alone, so those retirement investments are going to be an important source of supplementary funds. So, the big questions are, how much do Boomers have invested, how much income will their nest eggs produce, and is it enough?

How much income will the average Boomer get from their investments during retirement?

To understand what the typical Boomer’s retirement is going to look like, let’s look at the median amount members of this generation have invested. According to the Transamerica Center for Retirement Studies, it’s not as much as you might think. The Transamerica Center reports that the median retirement savings among Baby Boomer workers is just $194,000.

Since most Boomers are in retirement already, or getting close to it, they may not have a ton of time left to increase this pot of money. That’s unfortunate because, at a safe withdrawal rate, a $194,000 nest egg will produce no more than $7,760 in income per year.

That figure is based on the 4% rule, which is an old rule of thumb that says you can safely withdraw 4% from your retirement accounts in year one of retirement and then adjust annually for the effects of inflation. Experts traditionally believed that if you stuck to this you’d stand a good chance of your account lasting throughout a 30-year retirement.

This $7,760 is actually the best-case scenario for retirees too, as a recent update from Morningstar Analysts suggests lower returns make the 4% rule non-viable. Instead, the new suggestion is to limit withdrawals to 3.7%, which means the average Boomer with a $194,000 retirement plan balance would get just $7,178 from their investment account to cover living expenses.

Is this income enough?

Based on these numbers, the typical Boomer is likely to face some financial struggles in retirement, unless they have income sources outside of their retirement plan and Social Security.

The average Social Security benefit will be just $1,976 in 2025, which provides an annual income of $23,712. When combined with the $7,178 that comes from the retirement account of the average Boomer, the two most common retirement income sources would produce $30,890 to live on for the year.

For some retirees, especially those with paid-off houses and little other consumer debt, that may be enough. For those who still have a mortgage, who have high healthcare needs, or who want to travel and live lavishly, an annual income under $31,000 isn’t going to cut it.

Boomers need to be aware that they’ll need a much bigger savings account balance than the average to be able to enjoy their life in retirement without financial worries. Younger boomers who are still working should make sure they set aggressive savings goals to end up with enough, while Boomers who are already retired need to make sure they choose a safe withdrawal rate and build a budget around the funds they have available so they don’t find themselves broke late in life.