Much retirement planning focuses on maximizing the size of your nest egg. In theory, the more money you save, the easier your golden years are likely to be.
In January 2025, 4,626 U.S. adults 18 and older told Northwestern Mutual that the ideal amount they want to retire comfortably on is $1.26 million. (1)
Another commonly cited benchmark is Fidelity’s Income Multiple Guidelines, which recommend aiming to set aside 10 times your annual salary by age 67. (2)
Unfortunately, many retirees fall short of those goals. According to Empower, the average retirement savings for someone at age 60 is just $539,068. (3)
It’s easy to feel anxious about your future, especially if you haven’t saved as much as the experts say. However, if one or more of the following apply to you, you may be richer than you think.
For most families, housing and shelter are the biggest expenses they face. So, owning a house free from any mortgage and vacant is an ideal situation for your finances.
Many older Americans had the opportunity to buy their own home when home prices were very cheap. They have more time to pay off their mortgage.
According to the National Association of Homebuilders, nearly 40% of all American homeowners were mortgage-free as of 2023. And two-thirds of these mortgage-free homeowners were over 60 years old. (4)
These lucky individuals can enjoy a more comfortable retirement, even with a smaller nest egg, because they don’t have to worry about paying rent or a mortgage, traditionally one of the biggest expenses that drag down American incomes.
As of 2023, a typical retiree will spend about $65,149 a year, according to the U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey. (5) However, not everyone has the same lifestyle. If you spend less, you need less savings to live comfortably.
There are many ways to reduce your cost of living. For example, you can move 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.
Regardless of your approach, a tight budget allows you to live more comfortably on a slim retirement nest egg.
Traditional defined benefit pensions are becoming as rare as unicorns. According to the Bureau of Labor Statistics (6), only 14% of private sector workers have access to these traditional pensions, which provide employer-subsidized guaranteed monthly payments for life based on factors such as salary and years of service.
If you are one of these lucky pensioners, you have an additional source of regular income that you can rely on. Effectively, the size of your nest egg is less important when you have a strong pension flow from a private company in your account every month.
Read more: Vanguard reveals what could be coming for US stocks, and it’s 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 pull off a number of moves that could make your retirement more comfortable.
For example, it’s more cost-effective to initiate Roth conversions when you and your partner are in a lower tax bracket. You may also consider selling some of the assets in your taxable brokerage account for tax benefits with lower tax liabilities.
For many retirees, especially those with large pre-tax savings, reducing their tax burden is more practical than tightening the budget or chasing investment returns.
Flexibility can be a game-changer in retirement. Many retirees are reluctant to downsize their homes, 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 more easily adjust when a market downturn shrinks the size of your nest egg and find a way to live comfortably with what you have. A flexible retiree needs to live less than a rigid one.
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Northwestern Mutual (1); integrity (2); Empowerment (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 warranty of any kind.
