Worried your retirement nest egg isn’t at the ‘magic’ number? Here’s why you may still be okay

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Have you been losing sleep because your retirement savings don’t seem to match your goals? You’re far from alone.

One Schroders report found that Americans enrolled in workplace retirement plans think they will need $1.2 million to leave work for good and live comfortably. A Northwestern Mutual survey put the so-called “magic” retirement amount even higher, at $1.46 million.

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Still, many people nearing retirement don’t have anywhere close to that amount saved.

Empower says the median retirement savings for Americans in their 50s who have connected their accounts to its dashboard is $462,104. For those in their 60s, the median rises to $566,900, which remains well below those headline numbers. Northwestern Mutual also found that nearly half of Americans believe they are somewhat or very likely to outlive their savings.

Even so, retirees without a seven-figure portfolio often have options. Here’s why it may be worth easing up a little, even if you doubt you’ll reach your target before leaving the workforce.

Figure out your own retirement target

When comparing your balance with a flashy savings benchmark, remember that what works for someone else may not work for you. Your required amount depends on your expected expenses, whether anyone relies on your income and the lifestyle you want after you stop working.

Retirement planning can also shift over time. Your earnings, spending patterns and goals may change, which can make it hard to know whether you’re saving enough.

Instead of relying on a generic rule of thumb, consider working with a financial advisor who can help build a plan around your circumstances. There may also be a real advantage to getting professional guidance: Vanguard research found that investors who work with financial advisors typically earn about 3% higher returns on average than those who do not.

That is where platforms like Advisor.com can help.

The service vets advisors by track record, client ratios and regulatory history. Its network also includes fiduciaries, who are legally bound to act in your best interests. That can make it easier to connect for free with a vetted FINRA/SEC-registered advisor near you.

To use it, enter a few details about your finances and goals, and Advisor.com will match you with a qualified expert based on your needs and preferences.

Choosing the right advisor is not always simple, and there is no universal fit. That is why Advisor.com also offers a free initial consultation with no obligation to hire, so you can decide whether the match feels right.

Do not overlook Social Security

Social Security is a key backstop for people with little or no savings. The Social Security Administration says the average monthly retirement benefit is $2,088.79, or a little more than $25,000 a year.

Retirees can add their savings on top of that. For example, a retiree in their 60s with about $570,000 saved could generate roughly $22,800 a year using a 4% withdrawal rate.

That means many people — even those with modest savings or none at all — can combine Social Security with limited savings to support a basic but workable retirement. In many cases, retirement spending is also lower than expected.

That does not mean the details do not matter. The age at which you file, your earnings history and your household situation can all affect how much you receive.

If you are nearing retirement and unsure how to navigate those choices, organizations like AARP can be helpful.

AARP offers tools and information that can help you refine your Social Security strategy and avoid leaving money behind.

It can also help with Medicare decisions and point you toward other government benefits that may make retirement easier.

Membership comes with more than advice. It also includes a wide range of discounts, from prescriptions and dental services to savings on travel, entertainment and insurance.

Join AARP and get 25% off your first year.

Budget for health care costs

When estimating your retirement needs, do not focus only on day-to-day living costs. Health care can be one of the biggest expenses over a long retirement, and it is not always easy to predict. Fidelity Investments says a 65-year-old retiring now may need an average of $185,500 to cover health care costs throughout retirement.

Not everyone will spend that much, of course. Your total will depend on your health, insurance coverage and personal circumstances.

A smart place to start is by reviewing what your coverage includes and identifying likely out-of-pocket costs. Medicare can help with many expenses, but it does not cover everything, and premiums, deductibles and prescription costs can still add up. You may also need separate planning for dental, vision and long-term care.

If you want help comparing options, HealthCare.com lets you review health insurance and Medicare plans available in your area.

Enter your ZIP code to see what is available. If you need help comparing plans and prices, you can also speak with a licensed insurance agent who can answer your questions and help you choose coverage that fits your needs and budget.

After you pick a plan, HealthCare.com lets you enroll online or by phone, whichever works best for you.

Retirement spending is often lower

Living costs often fall after retirement, largely because many people own their homes outright or move into smaller, less expensive housing.

Housing is usually one of the biggest expenses in a household. Without a mortgage or rent — or with lower housing costs — and without a commute or dependents to support, retirees often spend less than working-age adults.

Bureau of Labor Statistics data show that the average household headed by someone age 65 or older spent about $61,432 a year, according to the latest available figures. That level of spending can often be covered by two Social Security checks, if both spouses collect benefits, along with modest investment income.

Even people living alone may be able to cover basic needs through Social Security and limited savings. The area that usually deserves the most preparation is health care, including making sure you have a solid long-term care insurance plan and using health savings accounts before retirement if possible.

If you do not have seven figures saved

If retirement is approaching and you have not reached your savings target, while also expecting a below-average Social Security benefit, working longer can improve your financial picture.

If delaying retirement is not possible, part-time or gig work may help fill the gap. The Bureau of Labor Statistics says that 19% of Americans age 65 and older were still working or seeking work.

Add income without taking on another job

If your savings are not where you want them, consider assets that can produce passive income.

Real estate is one possibility. Rental properties can provide monthly cash flow, and rising rents may help offset inflation over time.

But there is a tradeoff: owning rental property is not always as hands-off as it sounds. A leaky roof, an empty unit or a difficult tenant can quickly turn it into a second job. Before collecting rent, you also need to account for the down payment, financing, insurance, maintenance and other costs.

If you like real estate but do not want to manage property yourself, platforms like Arrived may be worth a look.

Backed by investors such as Jeff Bezos, Arrived gives investors access to SEC-qualified real estate investments, including rental homes, vacation rentals and diversified funds.

You can sign up, browse a selection of vetted properties and start investing with just $100.

Along with any potential property appreciation, Arrived’s offerings can generate passive income without the day-to-day work of being a landlord. No late-night calls about burst pipes required.

And for a limited time, investors can receive a bonus when opening an account and adding $2,000 or more.

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Article Sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Northwestern Mutual (1); Empower (2); Vanguard (3); Social Security Administration (4); Fidelity Investments (5); U.S. Bureau of Labor Statistics (6)