3 Key Retirement Income Stats: How Do You Measure Up?

How do you measure up to your peers? Photo: Flickr user Travis White.

Everyone wants to retire rich, or at least financially independent. However, there's a lot of evidence that few people actually live the sort of retirement that had wished for. Below, you'll find some data that covers three important retirement income categories. While everyone's situation is unique, it's helpful to see where you stand in relation to your peers.

Let's take a closer look at these categories. Hopefully, you're ahead of the averages. If not, don't despair -- it's never too late to do something about it.

1. 401(k) savingsThe 401(k) is an important savings tool, though it's one that too few fully exploit. Vanguard's annual report, "How America Saves," provides a significant amount of data. It's important to note the data only covers the approximately 3.5 million participants in about 3,000 sponsor plans that Vanguard manages for employers. Let's go over a few interesting pieces of information from the study.

Here are the average and median 401(k) balances among different age groups. Note that median is a more reliable indicator of the "typical" balance; it's right in the middle of all available data, whereas the average is skewed by outliers at the high end.

Source: Vanguard "How America Saves" report.

Here are the same figures separated into different income groups:

Source: Vanguard How America Savesreport.

As fellow Fool Brian Stoffelwroterecently, a $101,000 balance in a 401(k) would only provide about $4,000 per year in sustainable retirement income, based on the 4% withdrawal rule. Every single median age and income bracket shown above falls well below even that balance.

According to Vanguard, 88 million Americans participate in defined-contribution plans such as 401(k)s, with $5.5 trillion in total assets. On average, that represents a balance of $62,500 -- barely more than $2,500 per year in sustained income, based on the 4% rule.

The real concern here is that -- as you'll see further in this article -- more people will need retirement savings vehicles like 401(k)s for income in retirement, given that Social Security cannot fund a comfortable retirement and the number of pension plans offered by employers is rapidly declining.

2. Social SecurityAccording to the Social Security Administration, as of December 2014, the average retired worker drew $1,329 in monthly benefits. If two spouses collected the average monthly benefit, their household income from Social Security would come to about $32,000 -- far below the median U.S. household income of about $52,000.

If both spouses received the maximum benefit at full retirement -- currently $2,663 per month at age 66 in 2015 -- their income would exceed the national median. However, in order to receive the highest benefit possible, you must earn the maximum income subject to Social Security taxes for at least 35 years (the current maximum is $118,500). Therefore if you earn the maximum Social Security benefit, it will nevertheless replace only a small portion of your pre-retirement income.

In short, no matter your current income or your expected benefit, don't expect Social Security to sustain your current lifestyle.

3. Other sources of income in retirementRetirees might draw income from a number of sources. Here's how the balance has shifted over the decades:

Source: Social Security Administration.

Over the past half-century, a larger percentage of people have come to rely on Social Security and pensions for income in retirement, while a smaller percentage of people draw earnings from employment or assets such as stocks, bonds, and real estate. However, although fewer retirees are working, in the aggregate people over 65 are drawing more of their income from work than in the past:

Source: Social Security Administration.

There are likely a number of things driving this trend, including higher debt levels:

Source: Philadelphia Federal Reserve

Furthermore, there's a troubling trend for those over 65:

Source: Housing America's Older Adults,HarvardJoint Center for Housing Studies

As you can see, the percentage of those over 65 with a mortgage more than doubled to 40% in less than 20 years. At the same time, mortgage debt in general has exploded in the U.S.

These trends are interrelated. The average Social Security benefit and our paltry 401(k) balances don't come close to the median income levels. Given this and our growing household debt, it stands to reason that many retirees will still be working after 65 just to make ends meet.

The quality of your retirement depends on youIf there's one clear message from the data above, it's this: It's up to you to set aside funds well in advance of retirement if you really expect to have the same quality of life that you had in your working years.

So what's the best way for most people to achieve financial independence? Investing for the long term in the stock market and paying off debt. And the sooner you can start, the better. Based on the average annual return of the stock market for the past 30 years, every $1,000 you invest today would be worth $2,000 in 10 years.

Don't let the statistics above bring you down. Use them as motivation to make sure you don't end up in the same boat as most of your peers.

The article 3 Key Retirement Income Stats: How Do You Measure Up? originally appeared on Fool.com.

Jason Hall has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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