Many retirement plans focus on maximizing the size of your nest egg. Theoretically, the more money you save, the more comfortable your golden years will be.
In January 2025, 4,626 U.S. adults ages 18 and older told Northwestern Mutual that they believed $1.26 million was the ideal amount to retire comfortably. (1)
Another commonly cited benchmark is Fidelity’s income multiple guide; This guide recommends that you aim to put aside 10 times your annual salary by age 67. (2)
Unfortunately, many retirees fall short of these goals. According to Empower, the average retirement savings for someone in their 60s is just $539,068. (3)
It’s easy to worry about your future, especially if you haven’t saved as much as experts say is necessary. However, if one or more of the following apply to you, you may be richer than you think.
For most families, housing and housing are the biggest expenses they have to deal with. Therefore, owning a mortgage-free home is ideal for your financial situation.
Many older Americans had the opportunity to purchase their homes when home prices were much cheaper. They also had more time to pay off their mortgage.
By 2023, nearly 40% of all homeowners in the U.S. were mortgage-free, according to the National Association of Home Builders. And two-thirds of mortgage-free homeowners were over 60.(4)
These lucky people can enjoy a more comfortable retirement, even in a smaller nest egg, because they don’t have to worry about paying rent or a mortgage, which have traditionally been among the biggest expenses that eat into American incomes.
As of 2023, the typical retiree spends about $65,149 a year, according to the U.S. Bureau of Labor Statistics’ Consumer Expenditure Surveys. (5) But not everyone has the same lifestyle. If you spend less, you’ll likely need less savings to live comfortably.
There are many ways to lower your cost of living. For example, you might move in with family or move to a more affordable city or state. You can also downsize to reduce your utility bills and property taxes in retirement.
Whatever your approach, a tighter budget will allow you to live more comfortably in a lean retirement nest egg.
Traditional defined benefit pensions are becoming as rare as unicorns. According to the Bureau of Labor Statistics (6), only 14% of employees in the private sector have access to these traditional pensions, which offer employer-funded, guaranteed monthly payments for life based on factors such as salary and years of service.
If you are one of these lucky retirees, you have an additional source of regular income you can rely on. Effectively, if you have a solid pension flowing into your account each month from a private company, the size of your nest egg becomes less important.
Read More: Vanguard explains what could happen for U.S. stocks, ringing alarm bells for retirees. Here’s why and how to protect yourself
If you find yourself in a relatively low tax bracket in retirement, this is a golden opportunity to execute a variety of maneuvers that can make your retirement more comfortable.
For example, it is more cost-effective to initiate Roth conversions when you and your spouse are in lower tax brackets. You may also consider selling some of the assets in your taxable brokerage account to realize tax gains through lower tax liabilities.
For many retirees, especially those with large pre-tax savings, minimizing their tax burden is more practical than tightening budgets or chasing investment returns.
Flexibility can be a game changer in retirement. Many retirees are reluctant to downsize, unable to adjust their expenses, or dependent on caregivers living in high-cost cities.
If you have more control over where you live and how much you spend, you can easily adapt when a market downturn reduces the size of your nest egg and find a way to live comfortably with what you have. A flexible retiree needs less to live on than a rigid retiree.
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Northwest Mutual (1); Loyalty (2); Strengthen (3); National Association of Home Builders (NAHB) (4); Federal Reserve Bank of St. Louis (5); US Bureau of Labor Statistics (6).
This article provides information only and should not be construed as advice. It is provided without any warranty.
