Retiring with $1 million in savings is still possible
A $1 million nest egg may still let you retire on schedule, but don’t expect to give up your Costco card. Americans have, on average, just over $140,000 stashed away for their retirement, according to a study by investment firm Vanguard. But do you need to save one million dollars or more to afford retirement, or can you enjoy your golden years without seven figures in the bank?
As record-high inflation raises the cost of living, most Americans feel the sting when filling up their shopping carts. Reduced purchasing power also means every dollar saved for retirement may not go as far as initially planned.
On the back of escalating prices, aspiring retirees need to increase their savings target before they leave the workforce for good.
According to a study published by investment firm Vanguard titled ” How America Saves 2022,” Americans’ median sum for retirement is around $35,000. That means half of all savings balances are below this amount.
Media pundits and personal finance gurus routinely repeat: workers must save much more significant sums of money, even one million dollars, for their retirement. Clearly, the message is not getting through.
These figures appear shockingly low and highlight that retirement savings are inadequate for many people across the country.
The belief that workers must save a cool million to retire comfortably has been repeated so often it has become a cliché, but is that old bromide true? Do you need to accumulate a million-dollar nest egg to enjoy your golden years?
While some Americans will need to save a million dollars to accommodate their chosen lifestyle, others may require less. Ultimately, it all boils down to your needs and the compromises you are willing to make.
These strategies can help you enjoy your post-work years even if you fail to hit that million-dollar target.
Cut Your Kids Loose
Among the most common mistakes retirees make is spending too much of their savings supporting their grown children. While giving in to the temptation to help your kids is all too natural, doing too much could jeopardize your financial security.
If your kids are making an honest effort and working toward a sound financial goal, a little help here and there will not hurt as long as you can afford it. But if you routinely give your grown children a handout instead of a hand-up, it may be time for a little tough love.
Downsize Your Home
Even if you end up short of that much-vaunted million-dollar savings goal, you may have more money than you realize. When you quit your job, and the kids are on their own, you can downsize into a smaller home and pocket the equity you have spent a lifetime building.
Selling your current home and downsizing into a more modest property could free up hundreds of thousands of dollars in extra cash. That’s money you can save, invest and use to get you that much closer to your original post-retirement savings goal.
Seek Out Free Entertainment Options
Retirees have a lot of free time to fill, and filling time can be expensive. A weekly movie could set you back a hundred dollars a month, and going to concerts and plays could cost even more.
Luckily, you have a wealth of low-cost and free entertainment options at your fingertips – and plenty of time to seek them out.
Your local library is an excellent source of free books, movies, lectures, and other entertainment options. You can use the money you save to enjoy a nice dinner out on the town or squirrel it away for a rainy day.
Take Advantage of Travel Deals
Now that you are retired, you can choose when and how you travel. That means you can sign up for last-minute travel sites that offer deep discounts in exchange for flexibility.
Whether you love to cruise or crave adventure travel, you can find real bargains when you are not constrained by work schedules or tied down with the kids. You can save even more if you are willing to settle for less luxurious accommodations or stay with out-of-town friends and relatives.
You Can Retire on $1 Million
Knowing that you can retire on a million dollars, or possibly less, can give you peace of mind, but that knowledge can also jump-start your investment strategy.
Some workers feel so intimidated by that seven-figure target that they give up on saving and investing altogether, short-circuiting their dreams of a comfortable retirement before they start. Anticipating a more frugal lifestyle in your post-work years could inspire you to reach your personal goals for retirement without having to save more than $1 million.