When I’m 64 (or Thereabouts): Changes in Income from Middle to Old Age:
Peter J. Brady Steven Bass Investment Company Institute*
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As individuals approach retirement age, a common concern is the potential drop in income once they stop working. Many people believe that retirement will bring a significant decrease in their financial resources, leading to a lower standard of living. However, a recent study has debunked this myth by showing that income doesn’t drop off much in retirement.
The study, conducted by researchers at the University of Michigan, analyzed data from the Health and Retirement Study, a nationally representative survey of older Americans. The researchers examined income trends for individuals aged 50 and older over a 20-year period leading up to and following retirement. They found that, on average, income actually remains relatively stable in retirement, with only a modest decline in the early years.
One of the key factors contributing to this finding is the diverse sources of income available to retirees. While earnings from work may decrease or cease altogether, retirees often rely on other sources of income such as Social Security benefits, pensions, and investments. These sources can help offset any decrease in earned income and provide a steady stream of funds throughout retirement.
Additionally, the study found that many retirees continue to work in some capacity after retiring from their primary career. This additional income can help support their lifestyle and make up for any decrease in earnings from their main job. In fact, the study showed that a significant number of retirees experience an increase in income during retirement, particularly among those who work part-time or start a new venture.
The findings of this study have important implications for individuals planning for retirement. It suggests that the common belief that income drops off significantly in retirement may not always hold true. By diversifying income sources and considering continued work opportunities, retirees can potentially maintain or even increase their income in retirement.
Overall, the study provides valuable insights into the financial realities of retirement and highlights the need for individuals to carefully plan and manage their finances as they transition into this phase of life. With the right strategies in place, retirees can ensure a stable and secure financial future, without experiencing a drastic decline in income.
This is really good info. When I take off the savings and taxes along with life insurance my spendable money is less than half what I earned. SS is going to replace a lot more of my spendable income than I realize.
Concure so much. 40k+ difference in taxes, 70k+ difference in saving contribution, converting life insurance to paid up, and drawing off savings as I want…94% of working years spendable income in retirement…retired at at 56.
My Social Security alone will more than cover all of the expenses that I averaged in the last 3 years of work. So my income fund and annuity, which total more than my SS, will be free to do whatever I want with them. Planning for the future has literally paid dividends,
Interesting to hear you say 55-59 is highest income age. 40-49 is the time for maximum income in UK. 10 years difference seems a lot. Official stats from the Office of National Statistics.
I hope this article is correct, but I do not expect to have 90% of my spendable income after I retire. But I am planning on retiring early.
I concur have just retired several months ago. No longer paying fica, high federal and state taxes etc. my spendable income is around 90% of when I was working
"How Your Auto Insurance Could Destroy Your Retirement Plan (Repost)" Comments are turned off…. hmmm
Wall Street investors are doing everything they can to itheir hands on as much of evryone elses money as they can, including SS funds and control.
Very reassuring post Josh. I may have to reclassify you as an optimist! Retirement income depends on a lot of things. I am assuming this includes inheritance and depends on if you are a "favorite son."
Hi Josh
Hey Josh, I appreciate all the info you provide!! ? My wife recently was notified that she will recieve a RSU (restricted stock units) for a long term incentive award. She will recieve said award on her next 2 April 5, '25 and '26 anniversary. I'm assuming these are taxable in the year they are recieved? If so, is there a way to lessen the tax burden? Thanks!! Tom
Spendable income and expenses… what a concept!
At 40% of my pre-retirement income I have more spendable income than I had a year ago. Before touching retirement accounts.
Who knows how much my future medical expenses will be reduced by walking away from that very stressful desk job.
Count me as happily walking away.