What Is a Good Monthly Retirement Income in 2026? The $5,000 Question Most Retirees Get Wrong

Good inflation news changes nothing – markets close barely positive after cooling CPI fails to spark relief rally.

The quick scan: Markets gave up early gains after January's CPI came in cooler than expected, closing essentially flat as good inflation news failed to overcome persistent AI disruption fears and a brutal week of tech selling.

S&P 500: +0.05% to 6,836.17 – The index barely budged despite headline inflation falling to 2.4% (below 2.5% expected), posting a weekly loss exceeding 1% as tech continued bleeding
Dow Jones: +0.10% to 49,500.93 – The blue-chip index gained just 49 points, posting its second consecutive weekly loss of over 1% as the 50,000 milestone now sits in the rearview mirror
NASDAQ: -0.22% to 22,546.67 – Tech-heavy index fell for the third straight week (down over 2% weekly) as Nvidia -2.2%, Apple -2.3%, Meta -1.6%, and Broadcom -1.8% remained under pressure.

What's driving it: January CPI rose just 0.2% monthly (below 0.3% expected) with annual inflation at 2.4% (below 2.5% expected), the lowest since early 2024. Markets couldn't sustain morning gains despite over half of traders now pricing in a June rate cut. The problem? Inflation isn't the story anymore. AI displacement fears continue spreading beyond software into wealth management, transportation, and logistics. Mega-cap tech remained under pressure from scrutiny over datacenter capital expenditure sustainability. Rivian surged 23% on earnings, Applied Materials jumped 11% on semiconductor equipment demand. Nike, UnitedHealth, and Disney led Dow gainers while Visa, Apple, and Nvidia were the losers.

Bottom line: When the best inflation data in two years (2.4% annual CPI) produces a 0.05% market shrug rather than a celebration, retirees should understand the shift: good economic news no longer drives rallies because markets have moved past "will the Fed cut rates?" to "will AI destroy entire industries?" That's structural pessimism replacing macro optimism, making every week feel like a nail-biter regardless of what the data says.

Are You Saving Enough to Retire Comfortably?

The scoop: According to a recent Pew Research Center report, 40% of adults worry they won't have enough money to last through retirement. But how much is "enough"?

Data from the Bureau of Labor Statistics indicates retirees spent an average of $59,616 a year in 2025, or a little less than $5,000 a month. Of course, $5,000 a month isn't enough for everyone – many experts recommend saving enough to have access to 70% to 80% of your current income.

So if your pre-tax salary is $100,000 a year, you'd need access to $70,000 to maintain your current lifestyle in retirement, or about $5,833 a month. To reach 80%, you'd need approximately $6,666 a month.

The Budget Reality Check

To get a more specific idea of how much you'll need monthly in retirement, Vanguard senior financial analyst Sabino Vargas recommends creating a detailed budget, incorporating your current spending and saving habits, as well as expenses that may change in the future – like health care, travel, and mortgage payments.

"Write it down on paper, or store it in an app," Vargas says. "It should be a living tool that can be updated and changed over time."

George Mannes, personal finance editor at AARP The Magazine, suggests taking your retirement budget "for a test drive."

"Do it while you're still working," he said. "See how it balances dining out, entertainment and other things so you know if it's something you could follow long term."

And don't panic if you see a gap between your goal retirement income and what's in your nest egg. "If you're five to ten years away from retirement, it's not too late," Mannes said. "There's still a lot of time to cut back on expenses and rejigger your lifestyle."

Maximizing Your Income Streams

Retirement accounts remain the foundation. If your company offers a tax-deferred 401(k) plan, take advantage of any employer matching program. If you make $100,000 each year and contribute 6% of your pre-tax income, you'll have set aside $6,000 at the end of 12 months. If your company offers a 4% match, that's an extra $4,000 in "free" money.

Workers 50 or older can add catch-up contributions. If you're 60 to 63, you're eligible for "super" catch-up contributions – up to $11,250 for 401(k)s in 2026.

The Social Security Timing Decision

According to Mannes, most people can count on Social Security to replace between 35% and 40% of their income – but that's assuming you wait until your full retirement age (67 for people born in 1960 or later).

"You can begin taking Social Security at age 62, but if you do, you'll miss out on 35% to 40% of your benefits," said Mannes. "If you can't work or absolutely need the money, go ahead and take it. But one of the best things you can do is wait until your full retirement age – or even until you're 70."

If your FRA monthly benefit is $2,778, for example, waiting until 70 would boost that to $3,575. Starting at 62, though, will result in a monthly payment of just $1,822.

Beyond 401(k)s and Social Security

Approximately 35% of Americans expect to rely on Social Security and their 401(k) as their primary retirement vehicles, but the median 401(k) balance for a 64-year-old is just $95,642. That's nowhere near enough.

Dividends from stocks, interest from bonds, CDs, rental property income, and other investments are key to building a nest egg you can actually live on.

If you have a high-deductible medical plan, a Health Savings Account is a great way to cover Medicare premiums and other health care costs in retirement. "You contribute money tax-free, it grows tax-free and you can use it on medical expenses tax-free," Mannes said. "It's one of the greatest deals you can get."

Unlike a Flexible Spending Account, HSA contributions roll over year after year and can grow indefinitely. And unlike a 401(k), an HSA doesn't have a required minimum distribution.

The Downsizing Trap

Selling your home and moving into a smaller or more affordable place is a common strategy, but it has drawbacks.

"Downsizing is tricky," Mannes said. "It costs a certain amount of money to move and it still costs a certain amount of money to keep the lights on. So you have to really do the math to see if it's worth it."

Actionable Takeaways for L-Plate Retirees:

• Ignore the $5,000 average and calculate your actual income replacement ratio: The Bureau of Labor Statistics' $5,000 monthly average is meaningless – if you earn $100,000 pre-retirement, you need $5,833-6,666 monthly (70-80% replacement), not some national average that includes people with completely different lifestyles.

• Test-drive your retirement budget while you're still working: Create a detailed budget with current spending plus anticipated changes (health care, travel, mortgage payoff), then actually live on it for 3-6 months before retiring – discovering budget flaws after you've already quit is too late.

• Maximize employer 401(k) matching before anything else: If you earn $100,000 and contribute 6% to get a 4% company match, that's $4,000 in free money annually – missing this is leaving guaranteed returns on the table that no other investment strategy can match.

• Understand the Social Security claiming cliff: Taking benefits at 62 versus waiting until 70 means accepting $1,822 monthly instead of $3,575 – a $21,036 annual difference that compounds over a 20+ year retirement into hundreds of thousands of dollars left on the table.

• Recognize that the median 401(k) balance of $95,642 for 64-year-olds is catastrophically insufficient: Using the 4% withdrawal rule, that generates just $3,826 annually, or $319 monthly – which won't even cover groceries, let alone the $5,000+ most retirees actually spend.

• Leverage HSAs as the "triple tax advantage" retirement vehicle: Contributing tax-free, growing tax-free, and withdrawing tax-free for medical expenses (or as ordinary income after 65 for anything) makes HSAs more tax-advantaged than even Roth IRAs – yet most people ignore them entirely.

Your Turn:
Have you actually calculated your personal income replacement ratio (70-80% of your current income), or are you just assuming the $5,000 average applies to you despite having no idea what lifestyle that actually funds?
If you're planning to claim Social Security at 62 because you're "tired of working," are you willing to accept $1,822 monthly instead of $3,575 at 70 – a permanent $21,036 annual pay cut for the convenience of retiring five minutes earlier?
When you look at the median 401(k) balance of $95,642 for people your age, does that number make you panic or feel smug – and if it's the latter, have you actually done the math on whether your balance generates enough monthly income to fund your actual retirement?

👉 Hit reply and share your thoughts – your answers could inspire fellow readers in future issues.

☕ If this newsletter helped you see that "enough" retirement income isn't a national average but your personal income replacement ratio – and that the median 401(k) balance is nowhere near sufficient for most people's actual spending – consider supporting L-Plate Retiree on Ko-fi. Your support helps me keep translating retirement research into practical financial reality checks.

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