What to Do If You’re Nearing Retirement with Less Savings Than Expected

If you are nearing retirement and have less savings than expected, you are not alone.

Many Americans feel the same way.

The 2023 Protected Retirement Income and Planning (PRIP) study from the Alliance for Lifetime Income found: 

• 51% of consumers between 45 and 75 feel they do not have enough retirement savings to last their lifetime.
• 32% are not confident they will have enough money in retirement to cover basic monthly expenses.
• 44% are retired currently or retired previously and have gone back to work.¹

The sad truth is many retirees have less savings than expected.

According to a survey by Clever, “The median retiree has $142,500 in savings – 4x less than the recommended minimum for starting retirement ($572,000). […] 25% of retirees have nothing saved for retirement.”²

Retirement costs continue to rise.

Don’t lose hope if you are nearing retirement with less savings than expected.

Here are some steps to take that may help you get back on track.

Assess Your Current Financial Situation

The first step is to take an honest look at your current financial situation.

Review your savings, assets, and income streams.

Factor in Social Security and pension plan (if you are one of the lucky few who still has one).

Note – Some Americans think Social Security will provide enough for them to retire securely. This is a mistake. Social Security isn’t designed to cover the bulk of your retirement income.

According to the Social Security Administration, “For someone with average earnings who retires in 2024 at age 65, Social Security benefits replace about 39 percent of past earnings.”³

Now, consider your retirement needs and goals.

What is the gap between what you have versus what you need or want?

Be realistic.

[Related Read: 401(k) Balance by Age: How Do You Measure Up?]

Adjust Your Retirement Expectations

Now that you have a clear understanding of where you stand financially, you may have to adjust your retirement expectations.

To save more money and get more Social Security benefits, do you need to push back your retirement date?  

As much as you may want to retire today, it may be financially wise to put it off for a few more years.

You may consider working part-time in your retirement years to ensure you have enough to cover your retirement needs.

Maximize Contributions and Catch-Up Options

If you have less savings than expected as you approach retirement, make every effort to boost your contributions. 

Make sure you are contributing enough to receive the employee match. And then contribute even more!

Additionally, as you are reaching retirement, you want to take advantage of catch-up contributions. 

Employees with 401(k)s, 403(b)s, most 457 plans, and federal Thrift Savings Plans can contribute up to $23,000 in 2024.

For those ages 50 and older, the 401(k) catch-up contribution remains at $7,500 for 2024 – for a total of $30,500.

Reduce Living Expenses

To live with more in the future, live with less today.

Cut unnecessary expenses. Take all the money you save and put it toward your retirement savings.

Some people will make up for the loss by cutting expenses, but others will need to make more significant changes, such as downsizing a home or trading in a newer vehicle for an older one.

You may even want to consider relocating.

The cost of living during retirement varies significantly from state to state.

A study from Go Banking Rates calculated the annual living costs for retirees in each state in the United States. 

The state where your $1 million 401(k) savings will last the longest is Mississippi (22 years, 8 months, 12 days).⁴ 

You may need to consider moving to one of the states where your retirement savings will last longer.

See how long your savings will last in the rest of the states here.

Explore Additional Income Streams

If you have less savings than expected as you approach retirement, explore additional income streams that may help further increase your retirement savings.

Look into part-time jobs, freelance work, or monetizing your hobbies to boost retirement savings before and during retirement.

Another option is to look for real estate investment opportunities or rental income to supplement your income during your retirement years.

Reevaluate Your Investment Strategy

If you are behind on savings, it’s crucial to reevaluate your investment strategy.

For example, you may need to make some aggressive moves to boost your savings, but at the same time, you don’t want to risk too much.

The goal is to preserve your wealth while still generating returns.

This isn’t easy to do without financial knowledge.

For this reason, it is recommended that you consult a financial advisor for guidance.

[Related Read: Is Professional 401(k) Account Management Really Worth It?]

Plan for Healthcare Costs

Medical expenses are one of the costliest expenses during the retirement years.

Fidelity Investments 22nd annual Retiree Health Care Cost Estimate in 2023 found, “A 65-year-old retiring this year can expect to spend an average of $157,500 in health care and medical expenses throughout retirement [or $315,000 for a couple].”⁵

Additionally, according to Merrill, “Someone turning 65 today has a nearly 70% chance of requiring some type of long-term care during their lifetime. […] A private room in a nursing home can cost upward of $100,000 per year.”⁶

Now is the time to consider health insurance options like Medicare and supplemental plans to start building an emergency fund for unforeseen medical expenses.

Get Help

A professional advisor can provide personalized advice tailored to your financial situation, helping to optimize your 401(k) performance so you can catch up and boost your savings.

401(k) Maneuver provides independent, professional account management to help employees, just like you, grow and protect their 401(k) accounts.

Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that are hurting your retirement account performance. 

With 401(k) Maneuver, you can go about your life doing what you love with confidence, knowing we are managing your 401(k) for you.

Have questions about rolling over your 401(k)? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

Book a Strategy Session

SOURCES

1. https://www.foxbusiness.com/markets/inside-americas-retirement-income-crisis
2. https://listwithclever.com/research/retirement-statistics-2024/#crisis
3. https://www.cbpp.org/research/social-security/top-ten-facts-about-social-security
4. https://www.gobankingrates.com/retirement/planning/how-long-million-last-retirement-state/
5. https://newsroom.fidelity.com/pressreleases/fidelity–releases-2023-retiree-health-care-cost-estimate–for-the-first-time-in-nearly-a-decade–re/s/b826bf3a-29dc-477c-ad65-3ede88606d1c
6. https://www.ml.com/articles/healthcare-in-retirement.html

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