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Don’t Be Happy With Average When It Comes To Retirement

how much do you need to retire?I read an article last week from the Wall Street Journal that said three quarters of Americans nearing retirement had less than $27,000 in their retirement accounts, and one third of those have no sort of retirement account at all. One of my first thoughts after reading this was, “Wow, I must be doing pretty well with my retirement! ”

On second thought, maybe I shouldn’t be so proud to be ahead of the pack when the pack is doing so poorly. It’s kind of like winning a weightlifting competetion against kindgergarteners. It really means little looking at how well prepared we are compared with the majority. If you don’t prepare for your own retirement needs, all the statistics in the world won’t matter. You can’t be happy with average when it comes to retirement.

But How Much Do I Really Need For Retirement?

Isn’t that the million dollar question? From experience with my own family, I can tell you that you can get by on very little, but you will probably have to live in a very low cost of living area. Plan on not traveling or having many hobby expenses, and I really hope you like to cook your own meals. Don’t plan on leaving anything behind for the kids or grandkids either.

You can count on Medicare and Medicaid, maybe, to take care of your basic health needs. If you need a hearing aid, glasses, dental work, or medicines not covered by your plan, you just might be out of luck. Possibly a charity for low income persons might be able to help you out, but be prepared to explain your whole financial picture and why you chose to spend x amount on what you spent it on.

When your relatives do come to visit, don’t feel bad that they have to pay for their own food or feel the need to stay in a hotel because your accommodations are pretty small and in a bad part of town. They will still love you even if you can’t take the grandkids out for ice cream or to the movies. Also, don’t feel bad if you eventually have to move in with them when you can’t take care of yourself. You raised them didn’t you? It’s the least they can do.

If you would rather spend your money now instead of saving it for retirement, this is an honest picture of how your golden years will likely be spent. I’m not saying it’s wrong or bad, but is this really how you hoped to spent retirement?

How I Plan To Spend Retirement

While we still have at least a decade before we hang up our day jobs for good, Jim and I have pretty much decided we want to move somewhere warmer and closer to a metropolitan area with a major airport. We would like to take one or two big trips a year. We want to be able to eat lunch out (with the senior discount, of course!), be able to participate in activities we enjoy, and not feel guilty if we want to buy a new pair of shoes or go to a movie or concert (Rolling Stones Centenarian Tour anyone?). We want to be able to afford dental care instead of just having our teeth pulled if something goes wrong. You can live on soft food, but there are lots of crunchy things I like to eat.

We also hope to be able to help our daughter if its seem appropriate in the form of paying for part of her education or helping her with a down payment on a home. If we are lucky enough to have grandchildren, we’d like to spoil them a little bit or take them on trips. If it works out that one or both of us need to live with our daughter as we get older, and that works for her, great. However, I never want her to feel she has to take us on because there are no Medicaid beds available and we’re about to be out in the street.

How Do I Know How Much To Save?

Well, you really don’t. If you are aware of your cost of living expenses, though, you can get a pretty good estimate. Plan that health care expenses will go up. Housing and transportation costs should go down after you pay off a mortgage or quit commuting to work. Hopefully you will be in a lower tax bracket after you working years are over. In our case, we added up what our monthly expenses will be minus the mortgage and put in a bit more for travel and the unexpected. Do we have to leave an inheritance or buy the grandkids stuff they don’t need? No, but we hope to be able to do that, and we have a PLAN in place to get us there.

The Numbers Are Too Scary

What if you put your numbers into a fancy retirement calculator and the amount of savings is so much that you’d have to consist on Saltines and water for 30 years to hit your goals? Don’t panic. Tonya at Budget and the Beach had a great perspective about this very topic last week.

I think calculators are fun, but count more on your expected expenses. You can always move somewhere cheaper and downsize on housing if you need to. You can also start taking care of yourself so that you have a great shot at being healthy. Most importantly, start living below your means and get your high interest debt paid off. Start saving, even if it’s only a tiny amount. Letting fear of not having enough stop you from doing anything is the worst plan ever.

Don’t Look at Averages

If the average American is screwed as far as a comfy retirement, it’s sad, but not your fate. Don’t be tricked into thinking you’re doing great because you’re better than average. Decide what you want. Make a realistic plan for getting there, and most of all, be extraordinary instead of average when it comes to retirement.

Have you thought about how you want to spend retirement? Dentures, implants or just pull out the bad teeth?

Image: Freedigitalphotos.net/Artur

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.


  1. 27K? Yikes, I have more than that already!
    Here’s the plan for me: keep saving, lots more.

  2. I’ve also really stopped thinking about retirement savings in terms of “the magic number” that you have to save up for. Since my retirement strategy will occur in segments, I’m really more focused on making sure each segment is properly financed. Plus I want to continue my passive income efforts which will only help subsidize my needs that much more.

  3. Those numbers really scare me!! Wow. $27k would last you a year if you were lucky! Like you guys, our plan is to be able to have a life that is free of monetary worry. Really, we’re quite simple people and don’t need or want much in the way of extravagance, but at the same time, we want to be able to travel, eat out, bless the kids and grandkids, etc., without freaking out about the cost of it. Just one more reason to dump the debt ASAP. 🙂

  4. I would like to spend my retirement with NO worries of running out of money. You raise a good and often overlooked point that we shouldn’t be shooting for average – instead we should shoot for saving a lot more than the average person.

  5. I honestly have no idea. My guess is that we’ll quit working altogether in our early 50’s. I want to continue to work until our kids are adults at the very least.

    If I’m still working online at that point, I will probably just keep at it.

    • That’s an important point Holly – just because you CAN retire doesn’t mean you MUST retire. If working online still floats your boat after “retirement” then why wouldn’t you continue? I fully expect to keep working – but on my projects and on my time. If I happen to earn some money doing them, then great.

    • I’d like to work to feel useful and if I enjoyed it, but I’d also like to be able to take a month or two off at a time if I wanted.

  6. I’m with you. I cringe when I see those numbers for two reasons: 1) They’re so low, which makes me scared for those people, and 2) I hate to think that other people are using those numbers as benchmarks. We all really need to run our own numbers and measure ourselves against our own benchmarks. National averages are meaningless for our personal situations.

  7. Even we, with $200k in student loans, have more than $27k in retirement and we’re nowhere near retirement age! But, like you, I’m not going to stop there even if we’re in the top two-thirds.

    I think some people think they can keep themselves healthy enough to not need hearing aids or major dental work or long term care. But I really don’t think you can count on anything going right as we age! My parents hit the Medicare donut hole within months of the new year.

    • My dad always thought he’d work forever, but health problems are really slowing him down. You can’t count on being healthy, although I hope I am.

  8. As has been mentioned, those are some pretty scary numbers. This reminds me of a conversation I had with some work colleagues the other day. We were talking about retirement plans – and frankly NONE of them seemed to have any clue as to how much they expected to need in retirement. I’m still 10 years away – but I’m starting a monthly tracking system that will help me better understand what my average costs are now. Even if I don’t give it any real thought for the next 5 years, this data will prove invaluable when I finally start the detailed planning!

    • I think most of the people I know who are around my age are not actively planning for retirement. I think most of them assume they will have at least another 20-25 years of working. I plan on not working that long!

  9. I haven’t thought about what I’d actually NEED to live..I feel like so many factors can change. I don’t even know if I want to be living in LA in the near future. For sure I could save a lot more living somewhere cheaper…not just in retirement but now. But we have very similar type lifestyles that you mentioned you’d like in retirement. I like the simple things. All with the exception of grandkids and kids of course unless I marry someone who already has them! Again, SO many factors. It’s food for thought though…

    • It’s really cheap to live where we do, I just can’t take the cold anymore. Phoenix is sounding better and better the older I get.

  10. On the other end of the spectrum, the average net worth (not median) is around $670K, and we’re just getting to “average” and feel like it’s a big accomplishment, but we’re not planning on slowing our savings as a result of it. =)

    • That seems like a pretty high average net worth as compared to retirement savings. I never know which statistics to believe, so I think that’s another great reason to make your own statistics.

  11. I have no intention of being average when it comes to our retirement. I don’t want to spend those years sitting around and watching Jeopardy (altho, I do like Jeopardy. Alex Trebec will probably be long gone by then)..

    Instead, I want to travel, and have new experiences. The averages, as low as they are, are just not going to allow for that.

  12. I have no idea how I want to spend retirement, but I don’t want to just go with the average with regards to my savings. Why do anything on just an average scale? That is boring!

  13. It just breaks my heart to see that number so low and how many people are in that situation. So many people delay saving for retirement and I have no doubt at that time, it felt like the right decision, but in so many cases, people don’t save for bad reasons. Sadly, I think there are many people who presume that they will be able to survive on social security and what little money they have set aside. Like you said, it’s not impossible but it’s unlikely to be the retirement of their dreams either. I do agree, however, that people too often look for a universal magical number that they need to hit. And there isn’t a universal number. There is only your number, which may shift a bit as your vision for retirement becomes clearer, but don’t waste time working towards other people’s retirement goals, work towards your own number.

    • I agree it’s really sad to get close to retirement age and realize you have nothing set aside. I can’t imagine having nothing to show for all my years of work.

  14. $27,000 is just so sad. Granted, I only have $5,000, but I’m also 24.

    I’ve been doing a lot of thinking about retirement lately. I would do exactly what I do now — read, write, spend time with my husband, and travel. I don’t make a lot of money writing, but I make enough and I love my life. My husband loves working, but I’d like to continue saving so he can quit if he chooses to in the future.

  15. You are right on that it is vital to tailor your projections based on accurate numbers for you! For example, it’s often suggested that you assume expenses in retirement will be 85% of current income, or something like that… but that doesn’t actually factor in your actual expenses. It’s important to tailor all projects to what is true for your financial life, for sure!

    • I am pretty sure our retirement expenses won’t need to be 85% of our current income unless we have a ton of health spending that is beyond my control.

  16. My husband and I are hoping for an early retirement in the next 5 years, and think about it all the time! Once we are done paying college tuition for our son, we will definitely buy a much smaller house and downsize to one car. We will save significantly on mortgage, property taxes, and home and car insurance. We also hope to move to an area with a lower cost of living. We would rather spend extra money on travel than home and car maintenance. We try to stay healthy, and don’t plan to end up strung out on all kinds of prescription meds that keep us ticking along well past our sell-by dates. Assisted living is too expensive, and our goal is to avoid it if at all possible.

  17. I have no idea what our retirement will look like, but I’m pretty confident we’ll be sent for our savings if we keep our lifestyle low and retire in our 60s. I’m not sure I have a personality suited for retirement, though – even with a low withdrawal rate I think I’ll be pretty nervous about running out of money because of inflation of medical costs, changes in tax law, etc.

    • I don’t think I’ll ever sit around and do little as long as I’m able, but I would like to feel secure enough that I know I don’t have to work.

  18. The retirement plan for my generation seems to be, “eat poorly and keep working until you drop”.
    That should put a crimp in your “people keep living longer and longer” theories.

  19. So, the slightly head tilting confusing part for us is, even though we racked up 109K in credit card debt, and we had to stop contributing to our 401K while we paid off our credit card debt, we had managed to build up our retirement 401K pretty nicely. Thank goodness for employer contributions I guess. Looking at retirement planning is on the top of our list for the next few months….

    • We always contributed to retirement while racking up debt. I guess you could say we were spreading our money equally, just not all for good purposes.

  20. I always used to have clients say, “How do I compare to everyone else?” When everyone else sucks, who cares? I’d usually say that, “You’re WAY ahead of everyone else, but that has nothing to do with your goals…..”

    • It’s always in the wording. When a patient asks how bad their eyes are, I always say, well there are lots of people better and worse than you, unless it’s the worst prescription I have in the practice. Then I tell them how unique they are.

  21. I hope to have just a little more than $27k at retirement. Maybe a cool $28,500??


    But seriously, It’s all about expense reduction and saving 25x your annual spending. The numbers aren’t as bad as the financial services industry would like you to believe. I think our number if between 800k and 900k. And with home equity and other wise investment, should be there by 50. We’ll see 🙂

  22. This is such an essential conversation. I think it’s important for young adults to approach this topic and not get too hung up on calculators and averages, like you mentioned, because the act of putting away a healthy amount each month in your early 20s will put you way ahead of the ‘average’ from the get go. That being said I’m a huge hypocrite because I play around with retirement calculators all the time. We’ve just decided if we can always aim to max out our Roth IRAs each year in addition to whatever retirement plan is offered by our employer..we’ll be doing pretty well.

  23. Setting your retirement funds first is very important. That is the fruit of all your hard works and entering to the time of relaxation. That’s why it is very important on what to retirement plan to invest.

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