The goal of every potential retiree is to have enough saved up to be able to retire comfortably. But this is often very challenging. A report by the Employee Benefit Research Institute shows that around 65% of Americans have less than $100,000 saved up for retirement, and more than a quarter of those individuals have less than $1,000 in their nest.
It’s challenging to make up if you fall short in your retirement. But do you need to save so much to retire? Is it possible to retire with less than $100,000? Let’s find out.
Utilizing Every Dollar
Everyone’s financial needs are different because of the difference in lifestyle. So whether you can retire with $100,000 or less is dependent on your lifestyle. Some retirees may spend the whole sum in a year, while it can last several years for others.
The general rule of thumb for retirement withdrawal is the 4% rule. The rule suggests withdrawing 4% of your savings in your first year of retirement and then adjusting subsequent withdrawals to account for inflation. Your retirement savings can last up to 30 years if you abide by this rule.
The 4% rule may not be perfect, but it provides an excellent benchmark to gauge your withdrawal each year. If you retire with $100,000, following the 4% rule, your first annual withdrawal will be $4,000.
It’s nearly impossible to live on $4,000 in a year, but most retirees are entitled to Social Security benefits. According to details from the Social Security Administration, the average monthly benefit is around $1,543 and $18,500 annually.
Unless you have other income sources like pension, you may need to survive on only Social Security and your retirement savings, which amounts to around $22,500 annually.
What Happens if That Isn’t Enough?
While some retirees may live on $22,500 annually, most may find it challenging to live comfortably and pay their bills with that amount. Fortunately, there are several things you can do to boost your retirement income.
One of the options available to you is to hold off Social Security to increase your benefits. If you can hold off filing for a claim until you are age 70, you can increase your monthly benefit by up to 32%.
If you aren’t retiring in a few years, consider picking up a second job or starting a side hustle to earn more money to put towards retirement. Also, consider moving to a smaller home to save costs. While it may be challenging to live on $22,500, lowering your living costs can provide you with more money to put into your retirement savings.
Furthermore, it would be best to consider investing in dividend stocks to boost your retirement earnings. With dividend stocks, you’ll be paid a specific percentage as a quarterly or annual dividend. For instance, if you invest $1,000 into a share with a 5% yearly dividend, then you’ll receive $50 annually in dividend earnings. This doesn’t mean you should put all your money into individual stocks. There’s still a need to strategize and identify the best stocks to include in your portfolio.
In conclusion, it isn’t easy to plan for retirement, especially considering the current economic downturn. But regardless of your financial position, these steps can help you plan towards a successful retirement.