Planning for retirement can be overwhelming, especially when it comes to calculating how much income you’ll need each month. Whether you’re dreaming of a relaxed life by the Santa Barbara coast or looking to maintain your current lifestyle, here are some key factors to consider before setting your retirement goals.
Determining A Good Retirement Income
Retirement planning often comes down to one central question, “how much money do I actually need in retirement?” Although the answer is dependent on your lifestyle, location, and financial goals, the standard rule of thumb suggests that retirees should aim for an income that is around 80% of their pre-retirement earnings.
However, there are no universal rules when it comes to determining retirement income needs. While general guidelines can provide a helpful starting point, the appropriate amount varies based on individual circumstances. Your actual income needs may be higher or lower depending on:
- Healthcare needs
- Travel and lifestyle goals
- Debt obligations
- Housing status (mortgage paid off or not)
- Taxes
- Location
For some retirees, especially those who plan to travel extensively or relocate to higher-cost areas, replacing closer to 90%–100% of pre-retirement income may feel more comfortable. Although certain work-related expenses, such as commuting, dining out during the workday, and professional attire, may decrease in retirement, other costs often remain the same. Housing and utilities typically continue, and new expenses, such as travel, hobbies, or increased healthcare costs, may arise.
How Much Retirees Spend On Average
Consumer spending patterns tend to change as people age. According to 2023 data from the U.S. Bureau of Labor Statistics, the most recent year available:
- Those aged 45 – 54 have an average annual household spending of $97,319
- Those aged 55 – 64 have an average annual household spending of $83,379
- Those aged 65 – 74 have an average annual household spending of $65,149
- Those aged 75+ have an average annual household spending of $53,031
At the same time, it was found that many retiree households report lower spending levels. The 2022 Spending in Retirement Survey conducted by the Employee Benefit Research Institute surveyed nearly 2,000 retirees between ages 62 and 75 and found that the majority reported spending less than $4,000 per month.
Location also plays a significant role in retirement spending. For example, California has the nation’s third-highest cost-of-living index at 142.2, making its overall expenses roughly 40% higher than the national average. By factoring in where you live, along with your lifestyle preferences and anticipated expenses, you can get a more accurate idea of what a realistic retirement budget might look like.
Where To Get Retirement Income
The most important step is understanding what defines a good retirement income for you and identifying where that income will come from. A thoughtful retirement plan outlines reliable income sources and how they work together to support your lifestyle, essential expenses, and long-term goals. There are generally five main buckets from which retirees often pull money:
- Social Security remains a primary source of retirement income for most Americans. Nearly 90% of people aged 65 and older receive Social Security benefits. According to a 2025 Gallup poll, 62% of current retirees say Social Security benefits are their major source of income. While Social Security alone may not cover all expenses, it provides a guaranteed, inflation-adjusted income foundation. The average Social Security benefit is around $1,869 per month, according to November 2025 data from the Social Security Administration.
- Investment portfolios provide another key source of retirement income. Withdrawals from retirement accounts, including 401(k)s, IRAs, Roth IRAs, and taxable investment accounts, often make up a significant portion of income.
- Annuities offer guaranteed income and can help protect against market volatility. Income annuities, fixed, and variable annuities each serve different purposes, whether for steady lifetime income or tax-deferred growth. *These guarantees are backed by the claims-paying ability of the issuing insurance company and are not FDIC-insured.
- Part-time employment can supplement retirement income through work, consulting, or passion projects. While helpful for some, relying on earned income indefinitely is not always feasible due to physical limitations or lifestyle preferences.
- Pensions are now relatively rare, with about 19% of state, local, and private-sector workers participating in a plan. Private-sector pensions are insured by the Pension Benefit Guaranty Corporation, protecting payments even if an employer fails. Some retirees also create their own pension-like income by purchasing an immediate annuity.
By combining multiple income streams, you can create a diversified, resilient strategy that helps ensure your retirement savings last and your lifestyle goals are achievable. Working with a financial advisor can provide guidance on balancing these sources, optimizing withdrawals, and planning for unexpected changes. Regularly reviewing and adjusting your plan with professional support can help you stay on track and adapt to changes in your personal circumstances or the broader economic environment.
For those planning to retire, or already retired, guidance and resources are available to help you make the most of your financial future. Consider us your Financial Advisor Santa Barbara. You can reach Tremblay Financial Services in Santa Barbara at 888.569.1982.
This material is for general informational and educational purposes only and is not to be construed as financial, tax, or legal advice. Tremblay Financial does not provide tax services. Tax rules vary and may change, so always consult with your CPA, tax professional, attorney, and financial advisor for guidance specific to your situation.
Sources:
https://money.usnews.com/money/retirement/articles/what-is-a-good-monthly-retirement-income
https://www.rentcafe.com/cost-of-living-calculator/us/ca/
https://worldpopulationreview.com/state-rankings/cost-of-living-index-by-state
https://www.moneydigest.com/1987899/how-much-average-retiree-spends-on-living-costs/
https://smartasset.com/retirement/80-rule-for-retirement
https://money.usnews.com/money/retirement/articles/10-essential-sources-of-retirement-income
https://www.fool.com/retirement/2025/12/22/average-social-security-benefit-for-retirees/
https://www.fidelity.com/viewpoints/retirement/spending-in-retirement
