Understanding Average vs. Median Income for Retirement
When researching financial figures, it's crucial to distinguish between average (mean) and median income. The mean is calculated by adding all incomes and dividing by the number of people, which can be skewed higher by a small number of high earners. The median, representing the middle value, offers a more realistic picture of what most people can expect. For households aged 60-64, the 2025 data shows a significant gap between the median income of $83,770 and the mean income of $125,100. This means that while some households in this age group have very high incomes, the typical household earns significantly less.
Key Sources of Income Around Age 60
For those considering retirement at 60, income will not yet come from Social Security, which can be claimed as early as age 62 (at a reduced rate). Instead, income for individuals still working or planning to retire at this time typically comes from a combination of sources:
- Continued Employment: Many individuals continue to work into their early 60s, contributing to their retirement funds and supporting their living expenses. Working longer also allows for higher Social Security benefits later on.
- 401(k)s and IRAs: Withdrawals from tax-deferred retirement accounts like a traditional 401(k) or IRA are subject to income tax and may be subject to early withdrawal penalties if taken before age 59½. However, strategizing these withdrawals can be a key part of your income plan.
- Investment Income: Income from taxable brokerage accounts, dividend stocks, or other investments can supplement earnings. A well-diversified portfolio is essential for navigating market fluctuations.
- Pensions: Some individuals, especially those in the public sector, may have a defined benefit pension plan that provides a steady stream of income. According to Annuity.org, the median private pension provides about $10,606 per year, but this varies greatly by profession.
Median Retirement Savings at 60
While income is a cash-flow measure, savings are a critical indicator of retirement preparedness. The Federal Reserve's Survey of Consumer Finances offers insight into retirement account balances, which are the main driver of income for those not relying solely on Social Security.
- For households aged 55-64, the median retirement account savings is $185,000.
- For households in their 60s, a 2025 Empower study indicates a median retirement balance of $539,068.
It is important to note that these figures vary significantly depending on the data source and the specific age range. The median is often a more useful metric than the average because it is less affected by very high or low savings totals at the extremes.
Comparison of Retirement Savings & Income at Age 60
| Financial Metric | Median Household Income (Age 60-64) | Median Retirement Savings (Age 55-64) |
|---|---|---|
| Amount | $83,770 | $185,000 |
| Significance | Reflects typical annual cash flow from all sources, often including employment at this age. | Represents the total saved assets for the middle-earning household. |
| Purpose | To cover current living expenses and potentially fund further savings. | To generate income streams throughout retirement. |
| Common Error | Confusing this number with actual retirement income, as many people are still working. | Misunderstanding that this lump sum must last for potentially 30+ years, necessitating careful withdrawal strategies. |
Factors that Impact Retirement Income
Inflation
Inflation is a significant risk for retirees, as it erodes the purchasing power of savings over time. A 3% annual inflation rate could cut the purchasing power of your savings in half over 23 years. This means that a fixed income stream may not be sufficient to cover rising costs of living later in retirement. Your investment strategy should be designed to outpace inflation.
Healthcare Costs
Healthcare expenses are a major factor in retirement, especially for those retiring before Medicare eligibility begins at age 65. Retiring at 60 means you will need to cover your health insurance costs for several years, which can be very expensive. Planning for these costs, along with potential long-term and catastrophic care, is a critical part of financial preparation.
Tax Implications
The way you withdraw from your retirement accounts can have a large impact on your overall retirement income. Withdrawals from tax-deferred accounts like 401(k)s and traditional IRAs are taxed as ordinary income. Understanding the tax implications of different income sources and developing a tax-efficient withdrawal strategy is essential for maximizing your available income. Consulting a tax advisor can be very beneficial in this area.
Withdrawal Strategy
A safe withdrawal rate is a critical component of retirement planning. The traditional "4% rule" suggests withdrawing 4% of your savings in the first year of retirement and adjusting for inflation annually. However, this is not a one-size-fits-all approach and depends on factors such as market conditions and life expectancy. A flexible strategy that adapts to market fluctuations is often more sustainable.
Conclusion
Determining the average retirement income at 60 is complex, with median household income data from 2025 suggesting a figure around $83,770 for the 60-64 age bracket, reflecting many who are still working. The more important takeaway is the significant gap between median retirement savings ($185,000 for ages 55-64) and the amounts financial experts recommend. Ultimately, your income potential at 60 depends on your savings, investment strategy, and how you plan for factors like inflation and healthcare. It is a critical period for assessing your financial picture and creating a personalized plan, rather than relying on broad averages. For a secure retirement, focus on maximizing savings, creating a smart withdrawal strategy, and considering all potential income sources.
Learn more about different savings strategies on the Social Security Administration's website: Retirement Planner.
