Analysis

You Don’t Have to Be a Millionaire to Retire. Here’s Why

A 2024 survey from Northwestern Mutual found that many Americans believe they need to have $1.5 million of retirement savings to have a comfortable life in retirement. It’s good to set audacious goals for your retirement savings, but sometimes there’s a misconception that the only way to retire is to be a millionaire.

What if you’re nowhere near having a million dollars? Can you still retire? The good news is that many people with modest retirement savings can still retire; it happens every day. Even if your nest egg is far below $1 million, you still have options to retire well, if not exactly wealthy.

Let’s look at a few reasons why non-millionaires can still have a good life in retirement.

1. You will likely have Social Security income

Remember: You don’t have to save every dollar for retirement by yourself. Assuming you have a typical American job that is covered by the Social Security system, you will qualify for Social Security retirement income.

As of May 2024, the average Social Security benefit was $1,916 per month, or about $23,000 per year. That means the average retired couple has a combined retirement income of $46,000 per year, just from Social Security — before they have to start spending any of their own 401(k) money or other retirement savings.

Trying to retire on Social Security alone is not ideal, but it can be done. Research from AARP shows that 14% of older Americans rely on Social Security for 90% or more of their household income.

Other research cited by USA Today found that the typical senior (age 65 to 74) has $200,000 of retirement savings, and seniors who described themselves as having a “satisfactory” retirement had only $50,000 to $100,000 of savings.

2. Your monthly bills might be lower in retirement

What if you could pay off your mortgage and own your house free and clear by the time you retire? What if you decide to downsize and move to a smaller home with cheaper utility bills, or a walkable neighborhood where you don’t need a car?

Some retirees decide to move to a lower-cost location or another country with a lower cost of living. There are many lifestyle choices you can make that won’t drain your savings account.

3. You might spend less in retirement

Many people’s household expenses go down considerably by the time they retire. People tend to spend less money as they get older (at all levels of wealth). Your future might be more frugal than you think. Not everyone wants a lavish, money-intensive retirement.

Investment firms and other companies with products pitched at seniors often have TV commercials with retirees waxing down surfboards, going skydiving, boarding cruise ships, and doing other expensive activities.

But what if you’re more of a homebody in your golden years and would rather garden, go to the library, and host friends for coffee?

But watch out for this big expense: Healthcare

There’s one bit of bad news for non-millionaire retirees: Healthcare for seniors is expensive, and not all of it is covered by Medicare. A Fidelity study found that the average retired person might need $157,500 of savings to pay for out-of-pocket healthcare costs in retirement.

And that number doesn’t include long-term care, such as nursing home care, that some people need at the end of their lives. According to the National Council on Aging, the typical nursing home private room costs $9,034 per month ($108,408 per year). If you don’t have long-term care insurance, nursing home costs could eat up every last dollar of your life savings.

But not everyone needs nursing home care; some people end their lives in the hospital, in hospice care, or at home. And not everyone needs to live in a nursing home for years; some people only need that level of care for the last few months or weeks of their lives.

Don’t let fear of possible future nursing home costs hold you back from retiring while you still are in good health.

Crunching the numbers: Retirement for non-millionaires

Let’s look at a few retirement savings nest eggs and see how much income you’d have in retirement after adding the average Social Security benefit. Results are shown for a single person and a couple.

Retirement nest egg 4% annual withdrawal from retirement Annual Social Security income 
(single/couple)
Annual total retirement income
(single/couple)
$200,000 $8,000 $23,000/$46,000 $31,000/$54,000
$500,000 $20,000 $23,000/$46,000 $43,000/$66,000
$750,000 $30,000 $23,000/$46,000 $53,000/$76,000
$900,000 $36,000 $23,000/$46,000 $59,000/$82,000

Data source: Author’s calculations

As you can see, even with some less-than-millionaire retirement nest eggs, many retirees can still expect a decent amount of retirement income. If you spend only 4% of your retirement savings per year, your retirement nest egg might even keep growing as you get older.

Bottom line

Don’t spend so much time worrying about saving $1 million for your future retirement that you forget to enjoy life today. By the time you’re ready to retire, your family situation, lifestyle, and financial priorities might be totally different than they are now.

It’s good to keep saving and investing. Open a brokerage account, buy stocks and bonds, and work hard in your career to build financial security. But don’t assume that everyone needs to be a millionaire or that there’s one “magic number” that will make everything perfect forever. Life is more complicated, messy, and beautiful than that.

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