Another way to look at it is that about 70% of pre-retirement income will typically be needed in retirement, at a minimum, and this is without extras like budgeting for increased health care costs (as there is of course an inevitable decline in people's capacities as they age) or like additional travel one may want to do in checking off bucket list kinds of activities. If our household income prior to beginning the Life of Riley was $75,000, 70% of that is $52,500. The suggested average 20% of retirement income from Social Security works out to $10,500 a year, leaving $42,000 a year to be obtained from nest egg income distributions. Dividing that figure by 0.04 (representing the 4% recommended level of yearly distribution, to avoid running out of one's nest egg principal) leaves us with a minimum household nest egg amount (not counting Social Security) of $1,050,000.
Yet the mean level of retirement savings at age 65 in this country is about $200,000, $400,000 for a couple. The significance of the earlier stat, that about two-thirds of us are not putting enough aside for retirement, is apparent in those figures. 4% of $400,000 is just $16,000. Combined with the average yearly Social Security payment by household, this means per year income for a retiring couple works out to a mean of only about $38,000 ($19,000 apiece), more or less half of pre-retirement income. This naturally considers merely the averages. Many have retirement incomes far lower.