Important Disclosures
All annuity guarantees are subject to the claims-paying ability of the issuing insurance company. Annuities are not FDIC-insured and are not bank products. Variable annuities are securities products regulated by FINRA and the SEC. This content is for informational purposes only and does not constitute financial, tax, or legal advice.
Key Takeaways
- The U.S. median retirement income for those 65+ is approximately $29,000 per year; the average Social Security retired worker benefit is $1,907/month as of early 2025.
- Retirement income varies dramatically by state — Maryland and New Jersey retirees earn roughly double the median income of Mississippi and Arkansas retirees.
- The average American aged 65–74 spends approximately $57,000 per year (BLS), nearly double the median retirement income — the gap is bridged by asset drawdown.
- Nine states have no income tax; others exempt Social Security and pension income specifically — net retirement income after taxes varies significantly from gross.
- Delaying Social Security from 62 to 70 increases the monthly benefit by approximately 76%, one of the highest-return financial decisions available to pre-retirees.
- Annuities can convert savings into guaranteed income at rates that often exceed safe withdrawal rate assumptions, and eliminate the risk of outliving the income stream.
How much do retirees actually earn? And how does that compare to what retirement actually costs where they live? The gap between average retirement income and typical retirement expenses varies enormously by state — understanding both numbers is essential for honest retirement planning.
The National Picture
According to the U.S. Census Bureau's most recent American Community Survey data, the median income for Americans aged 65 and older is approximately $29,000 per year, or roughly $2,400 per month. Mean (average) income is higher — typically around $50,000–$55,000 annually — reflecting the skewing effect of high-income retirees at the top of the distribution.
These figures include all income sources: Social Security, pensions, retirement account distributions, wages, dividends, and other income. For most retirees, Social Security is the largest single component. According to the Social Security Administration, the average retired worker benefit as of early 2025 is approximately $1,907 per month — about $22,884 annually.
Where Retirement Income Comes From
Income Source: Social Security | % of Retirees Receiving: ~90% | Median Annual Amount (Approximate): ~$22,884 (2025 avg retired worker)
Income Source: Defined benefit pension | % of Retirees Receiving: ~22% (private); higher for government | Median Annual Amount (Approximate): Varies widely
Income Source: Retirement account withdrawals (IRA/401k) | % of Retirees Receiving: ~40% | Median Annual Amount (Approximate): Varies by account balance
Income Source: Wages / part-time work | % of Retirees Receiving: ~25% | Median Annual Amount (Approximate): Varies
Income Source: Investment income (dividends, interest) | % of Retirees Receiving: ~50% | Median Annual Amount (Approximate): Varies widely
Income Source: Annuity income | % of Retirees Receiving: ~10% | Median Annual Amount (Approximate): Varies by product and premium
State-by-State Variation
Average retirement income varies dramatically by state, driven by differences in historical wages (which determine Social Security benefits), pension coverage, investment wealth, and cost of living. States with high concentrations of government workers — federal, military, state, and local — tend to have higher average retirement incomes due to defined benefit pension coverage. States with higher historical wages produce higher Social Security benefits, since the benefit formula is based on lifetime earnings.
State: Maryland | Approx. Median Retirement Income: ~$40,000+ | Notes: High federal/military pension concentration
State: New Jersey | Approx. Median Retirement Income: ~$39,000+ | Notes: High historical wages, strong investment income
State: Connecticut | Approx. Median Retirement Income: ~$38,000+ | Notes: High wealth concentration, financial sector retirees
State: Virginia | Approx. Median Retirement Income: ~$37,000+ | Notes: Federal and military retiree concentration
State: Massachusetts | Approx. Median Retirement Income: ~$37,000+ | Notes: High wages, strong pension coverage
State: — National median approximately $29,000 —
State: Arkansas | Approx. Median Retirement Income: ~$22,000 | Notes: Lower historical wages, limited pension coverage
State: Mississippi | Approx. Median Retirement Income: ~$22,000 | Notes: Lowest median retirement income nationally
State: West Virginia | Approx. Median Retirement Income: ~$23,000 | Notes: Economic decline, limited employer pension coverage
State: New Mexico | Approx. Median Retirement Income: ~$24,000 | Notes: Below-average wages, high senior poverty rate
Note: Figures are approximations based on U.S. Census Bureau American Community Survey data. State-level retirement income data is updated periodically; consult the most recent ACS release for current figures.
Income vs. What Retirement Actually Costs
Average retirement income is only meaningful in context of what retirement costs in a given location. A $29,000 annual income may be adequate in rural Mississippi but severely inadequate in San Francisco or Honolulu. The Bureau of Labor Statistics Consumer Expenditure Survey reports that Americans aged 65–74 spend an average of approximately $57,000 annually — nearly double the median retirement income.
The gap is bridged by asset drawdown: retirees spend down savings, home equity, and other accumulated wealth. This is why the adequacy of retirement savings — not just income — matters so much. Retirees without substantial assets beyond Social Security are significantly constrained in high-cost states.
How State Taxes Affect Net Retirement Income
Gross retirement income and net (after-tax) retirement income can differ substantially by state. Key variables: does the state tax Social Security benefits? Does it tax pension income? Does it have an income tax at all? Nine states have no state income tax; others have specific exemptions for retirement income that reduce effective tax rates for seniors well below the statutory rate.
A retiree with $40,000 in annual income — split between Social Security and pension — may owe nothing in state income tax in Florida, Pennsylvania, or Illinois (all of which exempt Social Security and pension income), but owe $1,000–$2,500+ in states that tax both. Over a 20-year retirement, this difference compounds significantly.
Strategies for Closing the Income Gap
For retirees whose income falls short of expenses, the core strategies are: delay Social Security to maximize lifetime benefits (claiming at 70 vs. 62 can increase the monthly benefit by approximately 76%), optimize the sequence of retirement account withdrawals to minimize taxes, consider relocating to a lower-cost or lower-tax state, and evaluate whether guaranteed income from an annuity could replace portfolio withdrawals and reduce sequence-of-returns risk.
Annuities are particularly relevant for retirees in the income gap: they convert savings into guaranteed income at rates that often exceed what systematic portfolio withdrawals can reliably sustain, and they eliminate the risk of outliving the income stream regardless of how long the retiree lives.
What is the average retirement income in the United States?
The median income for Americans aged 65 and older is approximately $29,000 per year according to U.S. Census Bureau American Community Survey data. The mean (average) is higher — around $50,000–$55,000 — due to skewing from high-income retirees. The average Social Security retired worker benefit as of early 2025 is approximately $1,907 per month, or about $22,884 annually, making it the largest single income source for most retirees.
Which states have the highest retirement income?
States with the highest average retirement incomes tend to have high concentrations of federal and military retirees (Maryland, Virginia), historically high wages (New Jersey, Connecticut, Massachusetts), or strong investment wealth. Maryland and New Jersey consistently rank among the highest, with median retirement incomes estimated above $38,000–$40,000 annually, compared to the national median of approximately $29,000.
Which states have the lowest retirement income?
Mississippi and Arkansas consistently rank among the states with the lowest median retirement income — approximately $22,000 annually — reflecting historically lower wages (which produce lower Social Security benefits), limited employer pension coverage, and lower investment wealth accumulation. West Virginia and New Mexico also rank near the bottom. Lower income in these states does not necessarily mean lower retirement adequacy, as cost of living is also lower.
Is $2,000 per month enough to retire on?
In some states and lifestyle contexts, yes — in others, no. The Bureau of Labor Statistics reports that Americans aged 65–74 spend an average of approximately $57,000 per year, or about $4,750 per month. $2,000 per month ($24,000 annually) falls well below this average. However, spending varies enormously by location, housing status, healthcare needs, and lifestyle. In low-cost rural areas with no mortgage and Medicare coverage, $2,000 may be adequate. In high-cost urban areas, it is not. Use a retirement income calculator to model your specific situation.
How can I increase my retirement income?
Key strategies: delay Social Security — claiming at 70 vs. 62 can increase the monthly benefit by approximately 76%, representing tens of thousands of dollars in additional lifetime income for those who live to average life expectancy. Optimize account withdrawal sequencing to minimize taxes. Consider whether an annuity can convert savings to guaranteed income at rates that exceed safe withdrawal rate assumptions. Evaluate relocation to a lower-cost or lower-tax state. If still working, maximize contributions to tax-advantaged accounts.
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