The Retirement Myth: Why You Don’t Need Millions To Retire Comfortably

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Many people envision retirement with millions of dollars in savings. It is a common belief that if you save hard and work harder, you will have a great retirement. 

But you don’t have to be a multimillionaire to leave retirement peacefully. If you have the right strategies and mindset, you can stop working, retire with less than what you think and have financial security and peace of mind. 

Here’s why you don’t need millions to retire and how you can retire with less.

Moving to a Cheaper Place (In Your Country or Abroad)

You can opt to live in an area that does not require as much money to maintain your standard of living.

It could be in the U.S. or any other country. The cost of living in certain places can be much lower, which can help you reduce your expenses so you don’t need to save millions to retire. 

In the U.S., there are plenty of cities that are perfect for retirement, where you can have a comfortable life while spending less money. These cities are much cheaper than the big ones.

For instance, cities like Tulsa, Oklahoma or San Antonio, Texas, are worth considering. The cost of living in these cities is relatively low compared to big cities like New York or San Francisco. The Compass report said San Francisco’s median home price topped $1.5 million in 2023, while Tulsa’s stayed under $250,000 for the past year.

This big price gap means your golden years can stretch much further in a cheaper area, giving you more wiggle room to spend or save.

If you’re open to moving abroad, you can save even more. Places like Mexico, Portugal and Costa Rica allow retirees to live well for way less than they’d spend in the U.S.

Numbeo’s report shows that Portugal has a lower cost of living than the U.S. by about 39.3%.  Mexico offers even more savings, with costs 51.9% less than the USA.

On top of that, healthcare in many overseas retirement spots often costs much less, and you can live just as comfortably, if not better.

Moving to a cheaper place greatly reduces your living costs. This means your retirement savings can last long, allowing you to live well without having millions saved up.

Using Social Security and Pensions as a form of Supplemental Income 

Social Security and pensions are considered the main income source for most retirees. This does not mean that you only depend on these funds, but they can help you have a constant source of income that reduces the amount of money you need to save. 

According to the Social Security Administration, the average Social Security benefit for retirees in 2023 was about $1,843.96 per month or $22,127.52 per year. This comes up to more than $40,000 of joint income for a couple, which can go a long way in meeting your needs. 

However, knowing what the exact amount depends on your work history and when you begin claiming benefits is important.

You can start getting Social Security as early as 62, but you’ll get your full benefit if you wait until your Full Retirement Age (FRA) — which is either 66 or 67, depending on when you were born. 

If you delay until age 70, your monthly benefit increases, meaning you get a bigger check for life. Taken all together, a person can collect up to an additional 8% a year in benefits for every year one postpones receiving Social Security after full retirement age. This can be an excellent choice if you are in the position to make it.

Additionally, many retirees can draw from pensions, which provide a guaranteed monthly income based on your employment history. While not as common as they used to be, they still form huge revenues for most retirees, mainly because of government agencies and more extensive corporations.

Downsizing and Changing the Lifestyle 

The notion that you have to keep the same lifestyle is simply not true. Most retirees state that they can save more money by downsizing their homes, moving from a bigger house to a smaller one, or even living in an RV. 

For example, most retirees change houses from family suburb homes to smaller apartments or condos meant to fit a couple. As per the National Association of Realtors, the median existing home price in the U.S. stood at $410,900 in 2023. 

However, the cost of homes in smaller houses in relatively cheap areas can be much lower. This means that you can cut down on the monthly mortgage, property taxes and utilities and even cut on the cost of maintaining a larger home when you sell your home and move to a smaller house.

Also, some retirees choose to live in RVs, which can be economical and convenient. Many people decide to work remotely and retire at the same time, and one of the ways to do so is to live in an RV full-time.

Full-time RV living is inexpensive as it allows you to travel from one place to another while spending little money. New RVs can be as cheap as $10,000 and as expensive as $400,000. Compared to the costs of owning a house, RVs are a much more economical and flexible way of living for many retirees. 

So, by adjusting these changes, retirees can cut down on their spending, allowing them to afford other important aspects of their retirement life, such as travel or hobbies.

Turning Hobbies into Income Streams

Many retired people find it possible to supplement their income with side hustles or personal projects.

Whether you are a crafter, a photographer, a writer, or a teacher, making a living through your hobby can be a secondary income that can provide a supplemental income stream that eases the reliance on savings.

For instance, if you love photography, you can sell your pictures on stock photo sites or take photographs for people around town or local clients. Writers can generate income by creating blogs, books or offering freelance writing services. Artists can make crafts for sale on Etsy or at craft fairs. 

This extra money can be used to pay for the unexpected, cover travel or even put money toward future savings.

Retirees generally start small, either part-time or independent of any employers, and grow income. 

The 4% Rule and Quick Withdrawals

The 4% rule is one of the most well-known retirement planning strategies that says you can take out 4% of your retirement account every year and not run out of cash for at least 30 years.

If, for instance, you have $500,000 in investments, then pull out 4% per year ($20,000) without draining the principal amount by any significant margin. 

Following the 4% rule, even a modest nest egg can be saved for a nice retirement. You can make smaller sums last longer by managing how and when you take withdrawals. You can also stretch savings if you have another source of income, like Social Security or pension. 

You can retire comfortably with a smaller nest egg, but you don’t have to burn millions in the bank with a bit of planning and smart withdrawals.

Healthcare Expenses in Retirement Can Be Controlled

Healthcare can be one of the biggest expenses in retirement, but it doesn’t have to break the bank.

Medicare kicks in at age 65 for much of your medical care, and retired workers can add extra insurance or HSAs for a little extra out-of-pocket expense. 

For many retirees, prevention — routine exercise, healthy diet, annual health check-ups — can also cut costs. Staying fit through retirement boosts life quality and medical expenses. 

With healthcare under control, retirees could eliminate one of the biggest unforeseen costs and extend the useful life of their savings, so they don’t need to spend millions of dollars needlessly.

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