Have Less Than $1 Million Saved and Want To Retire Soon? What You Should Do
Written by
Heather Taylor
Edited by
Somnia Keesey
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One of the most common benchmarks for a comfortable retirement is having $1 million in savings. It is possible for retirees to retire now if they have carefully planned and invested for it.
What about those approaching retirement who don’t have $1 million (or more) in savings? Can they still retire or should they wait it out? If you have less than $1 million saved and want to retire soon, what should you do?
Do You Need $1 Million in Savings To Retire?
Here’s the good news. While $1 million is a benchmark figure for a comfortable retirement, it is not a hard savings requirement. Many people retire and do not have millions in savings.
Kendall Meade, CFP at SoFi, said the amount of money you need to save will depend on certain factors like your expenses and longevity. Other factors to consider include your desired retirement lifestyle, the state you live in (or plan to move to), risk tolerance and if you have other sources of income in retirement. Meade uses the example of retirees with pensions. They can retire with less savings than those who rely solely on their 401(k) or other retirement plans.
How Do You Know If You Have Enough in Savings?
There are a few steps those questioning if they have enough money saved for retirement can take to get answers.
Andrew Cremé, CFP, Cremé Wealth Team at SageSpring Wealth Partners, recommends examining your Social Security benefits. For some retirees, this can make up the majority of their living expenses. Others may find it doesn’t begin to cover basic expenses. Cremé said those in the former camp might not need $1 million to have an enjoyable retirement.
Meade also recommends working with a financial planner to create a comprehensive financial plan. Whether you have more than $1 million or much more modest savings, you can review specific financials and goals with the planner to determine if you’re on track to retire comfortably.
Lifestyle Changes To Help Increase Retirement Savings
If you know what kind of lifestyle you want to lead in retirement but are worried you don’t have enough money saved to reach these goals, you can start making lifestyle changes now for a brighter tomorrow.
Downsizing
Meade said one of the largest costs for any budget is usually housing. You can decrease this cost now by downsizing. If you own a home that is paid off and have smaller savings, consider selling the house and downsizing to build your savings.
“Even if you don’t have a mortgage, downsizing can lower other expenses, such as property taxes, home maintenance and utilities,” Meade said.
In addition to building your savings, downsizing gives retirees the flexibility to consider moving. You don’t need to spend your retirement in an expensive location. Consider relocating to a city, county or state with a much lower cost of living.
Sell a Vehicle
This is a fairly easy way to increase your retirement savings. If your family has several cars and doesn’t commute or travel frequently, discuss the possibility of selling one. You’ll save more money and cut down on car expenses including gas, insurance and maintenance.
Work Part Time
Many retirees return to work in some capacity. Cremé said these income streams might include working part time, doing some freelance consulting or turning on the income a pension has provided.
“Most [retirees] take on a lower stress job they simply enjoy, or transition to working just a couple of days per week in a part-time or contractor position with their original job,” Meade said. “This can allow many retirees to supplement their retirement income while still having more time to enjoy traveling or new hobbies.”
Save Your Raise or Bonus
Those who are further away from retirement are recommended by Meade to start putting their raises or bonuses into savings now for the future. Doing this gives you a chance to save more money for retirement. It also keeps future retirees from embracing lifestyle creep and any negative impact it might have on your savings before you retire.
“What we find is as we earn more, we end up spending more, but by saving this amount and keeping your expenses low, you would need less money to maintain your lifestyle in retirement,” Meade said.
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