When some of us think about retirement, we picture busy days on the go and nights spent at restaurants or the theater. But for many seniors, retirement isn't a period of nonstop entertainment, but rather one of financial insecurity and stress. It's estimated that over 25 million older Americans are currently living in poverty, and a big reason boils down to savings, or lack thereof.

Here's the problem: Many of us assume that our living costs are guaranteed to go down in retirement, but that doesn't always happen. In fact, recent data from the Employee Benefit Research Institute shows that 46% of households wind up spending more money, not less, during their first two years of retirement. For 33% of households, this trend lasts a solid six years.

Senior couple going for a walk


If you're thinking of retiring in the near term, you'll need to do two things first -- come up with a realistic budget, and make sure you have enough savings to support the lifestyle you're planning for. Otherwise, you risk joining the ranks of the millions of older Americans struggling to make ends meet.

How much will you spend in retirement?

For years, financial planners have been telling their clients that they'll need 70% to 80% of their previous income to pay the bills in retirement. But, in reality, many seniors will need far more than that. Transamerica reports that 59% of workers expect their standard of living to stay the same or increase in retirement, and while certain costs, like commuting, are eliminated by virtue of retiring, others are likely to remain stagnant or even climb.

Take medical care, for example, which, according to the latest projections, will cost the average healthy couple $377,000 over the course of retirement. Reading between the lines, if you're not super healthy, you can, and should, expect to spend even more. Additionally, because retirees tend to have more free time than their working counterparts, they're apt to spend more money keeping themselves occupied. Data from the Bureau of Labor Statistics confirms that seniors aged 65 to 74 spend more money per year on entertainment than those 10 years their junior. Throw in the fact that fewer seniors are entering retirement mortgage-free, and it's no wonder so many wind up needing more income than anticipated.

If you're about to retire, take the time to map out a budget that accurately depicts the costs you're likely to face. From there, you can see whether your Social Security benefits and savings are enough to sustain that lifestyle.

Where will your retirement income come from?

Transamerica's latest retirement survey reveals that 25% of current workers think Social Security will serve as their primary source of income once they leave the workforce. And that's fine if you expect that your living costs in retirement will magically get slashed by 60%. But since we just learned that almost half of senior households spend more money in retirement, not less, relying on Social Security alone is a dangerous move.

While Social Security should be a factor in your retirement budget, those payments will only suffice in replacing about 40% of the average worker's previous income. And since you might need a good 100% of your former income or more once you stop working, the only way to stay afloat financially is to save on your own.

Unfortunately, most Americans are failing in that regard. Transamerica reports that current workers have saved a median $69,000 for retirement. Meanwhile, only 25% of workers claim to have saved more than $250,000 in a dedicated retirement plan. Combine that with the fact that 30% of workers 55 and over have no retirement savings whatsoever, it's easy to see how so many seniors wind up cash-strapped at the worst possible time.

If you're planning to retire in the very near future, make sure you have adequate savings before you hand in your resignation. Believe it or not, just a few extra years of retirement plan contributions could spell the difference between living comfortably or running out of money.

Currently, workers 50 and over can contribute up to $24,000 a year to a 401(k) and $6,500 a year to an IRA. Maxing out your 401(k) plan for three more years will give you an additional $75,600 even if your investments earn a modest 5% average annual return -- and over a 20-year retirement, that's an extra $315 per month to work with.

Before you make your retirement official, take the time to truly understand the costs you'll be facing and be honest about whether your savings will suffice in keeping up. Postponing retirement isn't always ideal, but it's a move that could save you a world of financial hardship down the line.