Some people aim to retire with $1 million or more, only to wind up falling short. But while it’s one thing to not meet your personal retirement savings goal, it’s another thing to kick off your senior years with no nest egg whatsoever. And that’s precisely the situation an estimated 30% of today’s retirees are in.
According to a recent survey by Clever Real Estate, retirees today have an average of $191,659 in savings. But 30% have no savings at all.
To be fair, Clever surveyed 1,000 current retirees to arrive at its data. That’s a very small sample set in the grand scheme of American retirees.
But still, this isn’t the first survey to show that a large number of seniors have no money in savings to fall back on. And that’s problematic for these reasons.
1. Social Security won’t cut it
It’s a big myth that seniors can live comfortably on Social Security alone. In reality, those benefits will only replace about 40% of your earnings if you make an average salary. But most retirees need 70% to 80% of their former paychecks to cover their expenses.
Furthermore, while some people manage to retire with a modest pension, many companies have long done away with those. If you end up retiring without savings and are limited to only a Social Security check, you could end up struggling to pay your bills.
2. Living costs have a tendency to rise
Seniors on Social Security are eligible for a yearly cost-of-living adjustment, or COLA. But often, those raises don’t do a good job of keeping pace with inflation.
This year, for example, Social Security beneficiaries got a 5.9% COLA. But recently, inflation was measured at 8.3%. That means seniors are already losing buying power, despite getting their most generous Social Security boost in years.
3. Part-time work may not be feasible
Some people assume that it’s OK not to build savings because they can work part-time in retirement to supplement their Social Security income. While that’s a good plan in theory, it may not work out well in practice.
You never know if health issues or concerns might keep you from holding down a job. Just look at what’s happened with the COVID-19 outbreak. Before vaccines were introduced, showing up to a job may have been hazardous to seniors, and as such, many were forced to quit their jobs in 2020. You can’t necessarily bank on being able to work during retirement, even if you have every intention of doing so.
Don’t neglect your savings
Entering retirement without savings is a dangerous move that could cost you, so don’t neglect your nest egg. Even if you’re only able to sock away $100 or so a month in a 401(k) or IRA, you might grow your balance into a sizable sum if you do so over many years. If not, remember that bringing some savings into retirement is far better than kicking off your senior years with no savings at all.
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