According to a new study by Boston College's Center for Retirement Research, more than half of U.S. households are at serious risk of not having enough money to retire comfortably.


flickr/ 401(k) 2012

While it's true Americans are not the best savers in the world, and a good portion of our population won't have enough, I really don't think the retirement situation is as bad as experts might have you believe. What I mean is the formulas most experts use to determine retirement needs overestimate the requirements and underestimate how much income can be produced from a set amount of savings.

Here are three things to think about that can help you form a realistic goal for your retirement nest egg.

1. You might not need as much as you think
Experts have slightly different opinions of how much income you'll need to maintain your lifestyle in retirement, but 75-85% of your pre-retirement income seems to be the consensus.

This is by no means accurate for everyone, especially people who are good about saving money. For example, if you are in the habit of setting aside 15% of your income between IRAs, 401(k) accounts, and other savings methods, you're already living on just 85% of your income.

Plus, you have certain expenses before you retire that are either drastically reduced or go away entirely in retirement. Just to name a couple of examples, consider how much you spend on gas driving to and from work. Or, how much did you spend on business clothes last year? The point is, some expenses naturally become much lower in retirement.

Retirement Crown Flick Steven Dipolo

flickr/ steven dipolo

When you factor in the amount you currently save for retirement, and the expenses you'll no longer have, your actual income requirement could be much less than experts will have you believe. For many people 60-70% of pre-retirement income is more than adequate to maintain your lifestyle.

2. The 4% rule is outdated and a little too conservative
This is one of the most quoted "guidelines" by financial planners. Basically, the "4% rule" says that if you withdraw 4% of your retirement savings each year and adjust for inflation annually, you should have enough money to last for the rest of your life.

Quite frankly, there is no reason you shouldn't be able to earn more than 4% annually on your money, even with extremely conservative strategies. Even the safest-of-the-safe 30-year U.S. Treasuries yield about 3.25%, and you can invest your money in an investment-grade corporate bond fund, like Vanguard's Long-Term Corporate Bond ETF and earn over 4.4% with extremely low risk.

You could also buy preferred stocks, which are similar to bonds and nearly as safe, that pay 5-7% annually. And you could put a small portion of savings in certain income funds which can pay even more.

The point is, you should be able to withdraw 5% of your money and still be able to replenish it and then some every year.

3. Stocks are the way to go for most of your savings
If you're not retired yet, stocks are probably the place to be. One of the mistakes a lot of pre-retirees make is getting too conservative, too fast with their portfolio.

The simple reality is that stocks outperform any other asset class over any long period of time. It's true that you should tone down your risk as you get within a few years of retiring, but if you're under 55 and have more than half of your assets in bonds or other low-risk, low-reward assets, you may want to take another look at your strategy.

Many investors automatically equate the word "stocks" with "risk", but that's not necessarily the case. Solid blue-chip stocks such as Johnson & Johnson, Procter and Gamble, and Coca-Cola have extremely low volatility and average double-digit total annual returns.

So, how much do you really need to retire like you want to?
That depends on you, but it's likely not as much as you've been told. And don't forget to count things like Social Security and a 401(k) or pension when figuring out how much income you'll generate in retirement.

Beach Flickr Neilsphotography

flickr/ nielsphotography

Your comfortable retirement is probably much more attainable than you may think, and the best thing you can do is to start saving early and often and let your investments earn you as much money as possible.

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Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, Johnson & Johnson, and Procter & Gamble. The Motley Fool owns shares of Johnson & Johnson and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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