No matter who you are, retiring is bound to be an adjustment.
Not only do you have to adjust to the perks, like finally having time to make a serious dent in your reading list or not hitting the snooze button in the morning, but you’ll also have to adjust to not receiving a paycheck every month.
Earning less money—now that’s something that requires getting used to.
And, apparently, it might be a bigger change to make for people who earned more during their working years. MarketWatch reports that a new study from the Employee Benefit Research Institute (EBRI) finds that the more money you bring home during your career, the bigger income reduction you may be facing in retirement.
While the study excluded people with incomes of $1 million or more, it compared the household incomes of people ages 55-64 in 2000 to their incomes ten years later, when they were all age 65 or over. The researchers found that the median participant was bringing 65.8% of his pre-retirement income after age 65, including sources like pensions and Social Security.
That 65.8% figure in itself was noteworthy, as LearnVest recommends setting yourself up to receive 60-70% of your pre-retirement income, if you plan to keep yourself on a tight budget in the future, and 80-100% if you want a standard of living closer to what you had while working.
The researchers also found that those participants earning the least before age 65 (about $23,000 median income) actually saw their post-retirement income increase by nearly 10%. Those who had earned the most of the group (about $174,000 median income), however, brought home only half their previous income after 65.
The reason for this, the researchers say, may be two-fold. First of all, Social Security replaces a bigger percentage of the lower-earning workers’ wages (that’s how the program works) and second, those earning nearly $200,000 would have had to devote an enormous percentage of money to retirement savings to maintain that amount of income in retirement.
The takeaway, of course, isn’t that high earners should dread the end of work—it’s that every dollar counts. The more you can put toward your retirement well before you need it, the easier your adjustment should be.