Retirees Have Shockingly Little Retirement Savings

The median savings balance among retirees is alarmingly low, and that means many risk untold financial struggles. Social Security pays the average senior today about $1,500 a month, or $18,000 a year. That is a nice chunk of money to supplement outside income sources, but it is certainly not enough to live comfortably on. Yet many seniors risk having to do just that, and the reason boils down to not having enough retirement savings.

Today’s retirees have a median $45,000 in savings, and that excludes home equity. And while the latter can serve as a retirement income source of sorts, it can not take the place of a robust IRA or 401(k). If you are approaching retirement and are looking at savings in the ballpark of $45,000, consider this a wakeup call that you are not ready to stop working just yet.

If you do, you might really set yourself up for long-term financial struggles. You need healthy savings to get by. There is no single savings number that will guarantee you financial security during retirement. Some seniors can kick off their golden years with $100,000 in savings and do just fine, while others can retire with $1 million and still struggle.

But as a general rule, it is a good idea to close out your career with around 10 times your ending salary socked away for the future.

If your savings balance is closer to $45,000, it means you are probably nowhere close. In that scenario, you have to push yourself to work longer. Doing so will allow you to both accumulate additional savings while simultaneously leaving your existing savings alone. If you are 65 and ready to retire, but you instead work until 70, all the while contributing $500 a month to a retirement plan and investing it at a conservative average annual 5% return, you will add over $33,000 to your nest egg.

Another tactic to employ in this scenario is to delay your Social Security filing until you turn 70. You are entitled to your full monthly benefit at either age 66, 67, or somewhere in between, depending on your year of birth. But for each year you delay past that point, your benefits increase by 8%, up until age 70. And to be clear, that increase is permanent.

Financial experts have long supported a 4% annual withdrawal rate from savings. For $45,000 in savings, that means $1,800 in annual income. Combine that with $18,000 a year from Social Security like today’s average senior collects, and it is still not a lot to live on.

If you are not yet retired and do not have much savings, it definitely pays to boost your nest egg as much as you can while also delaying your Social Security filing to increase your benefits.

But even that may not be enough. You might still have to think about getting a part-time job as a senior, renting out a portion of your home, or employing other creative measures to ensure that you are able to make ends meet. Either way, the key is to be realistic about your retirement income needs and not go into your senior years assuming you will be just fine with $45,000 to your name.

If you are like most Americans, you are a few years behind on your retirement savings. Once you learn how to maximize your Social Security benefits, you could retire confidently with a peace of mind.