3 Effective Ways to Retire Without a Large Nest Egg

golden egg in a nest to retire

Nest egg to retire | iStock.com

We’ve all heard it before: Americans are lousy when it comes to saving for retirement. The justification for the lack of savings ranges from economic hardship to our inability to escape the consumerism that surrounds us on a daily basis. Regardless of the reason, many people refuse to change their financial habits. However, options are available to those who haven’t built a large nest egg for retirement.

An unsurprising portion of Americans have nothing saved for their golden years. According to a survey by Bankrate, 33% of 30- to 49-year-olds have not saved any money for retirement, while 26% of 50- to 64-year-olds say the same. In fact, 14% of people 65 and older haven’t placed any money aside for the future, either. Yet the majority of Americans feel the same or better about their personal finances than they did last year.

How much do you really need to save for retirement? The answer clearly depends on your own situation, but people are typically told they need to save $1 million or more. It’s safe to say that many Americans will not accomplish that milestone. Fortunately, there are effective financial actions you can take to help compensate for a lack of savings. Let’s take a look at three alternatives to accumulating a million-dollar nest egg.

1. Delay retirement

Jack Nicholson in About Schmidt

Jack Nicholson in About Schmidt | New Line Cinema

The first alternative is the most obvious, but also the riskiest. If your retirement funds are unable to generate sufficient income to replace your day job, maintaining some form of employment in your later years may be the solution for you. Delaying retirement can help improve your finances and secure larger Social Security payments. For example, someone born after 1960 can receive 124% of his or her monthly Social Security benefit by retiring at age 70 instead of age 67. While Social Security benefits could be taken as early as age 62, that person would only receive 70% of his or her monthly benefit.

Although working longer is a dangerous strategy since your future health status and job opportunities are unknown, many Americans appear to be relying on this approach. According to a Gallup poll, 24% of baby boomers don’t expect to retire until they reach the age of 65, and 39% of baby boomers don’t expect to retire until they are 66 or older. A separate poll from Wells Fargo reveals 37% of Americans with incomes between $25,000 and $100,000 say they will never retire and will work until they are either too sick or dead.

Working longer may also reduce health care expenses in retirement. Couples retiring at age 65 are expected to incur $220,000 in medical costs on average during their golden years, according to an analysis by Fidelity Investments. Couples retiring earlier, at age 62, and before Medicare coverage experienced an average of $57,000 in additional costs.

2. Eliminate debt

debt

Debt | iStock.com

Naturally, having fewer expenses in retirement reduces the need for income. Instead of focusing on small actions such as skipping daily lattes or canceling extra premium channels, make dramatic changes by reducing the biggest bills first and retiring debt free.

Do you really need that oversized house with the accompanying mortgage? Housing is easily one of the biggest expenses we have in life. If you’re looking to give your retirement a financial boost, live in a home that is affordable, not something that looks like it belongs on a magazine cover. You won’t miss those empty rooms and you’ll sleep better knowing that you have a mortgage-free retirement. Not having a $200,000 mortgage in retirement can save you $1,000 in monthly payments. If you’re willing to plan far enough ahead, make extra payments each month on your existing mortgage to pay it off sooner and save money on interest payments.

Brand new cars and auto loans should also be avoided. The average auto loan term is 67 months for new cars, according to Experian Automotive. A whopping 29% of all new loans originating in the fourth quarter of 2015 had terms extending out 73 months to 84 months, and the average amount financed for a new vehicle loan reached an all-time high of $29,551. A reliable used car can be found for at least half that price.

3. Pack your bags

man passenger in airplane using mobile smart device with headphones

Passenger on a flight | iStock.com/Genaro_Melendrez

Retirement is no time to be feeling extra patriotic. Leaving the comfort zone of America could help stretch retirement dollars further. The world is a big place, so you need to research the possibilities thoroughly, but plenty of publications around the Internet offer good starting points. International Living names Panama, Ecuador, Mexico, Costa Rica, and Malaysia as the best retirement spots in the world, based on factors such as cost of living, healthcare, climate, and housing.

If leaving the country is too unimaginable, you can still maximize retirement savings by moving to a different state. Bankrate.com recently listed Idaho, Montana, Virginia, Utah, Colorado, South Dakota, and Wyoming as the best retirement destinations within the United States. Yes, the winters are brutal in some of these places, but weather probably shouldn’t be your main concern if you haven’t saved enough for retirement.

“Our research shows that most of the top states for retirement aren’t your typical coastal destinations — some are located in the Midwest plains, while others are in the West surrounded by mountains,” explains Bankrate. “Only 1 state in the top 10 is located on the East Coast. One thing they do have in common: Every state on this list enjoys a cost of living below the national average. So whether you’re buying a house, getting a haircut or picking up a gallon of milk from the store, your retirement dollars will go far.”

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