Many seniors look forward to retirement, especially those who wrap up their careers feeling overworked and overwhelmed. But while the freedom associated with retirement is certainly something positive to anticipate, many Americans who go into retirement excited about that prospect wind up cash-strapped and miserable fairly early on. And the reason often boils down to one problematic assumption about their golden years.

You'll need more retirement income than you think

Many people assume that their living costs will drop dramatically once they stop working. But in reality, many seniors only notice a modest decline in spending. Some, on the other hand, wind up spending more in retirement than they did during their working years, and when we really stop to think about our bills, it makes sense.

Senior man in hat inserting card into ATM

Image source: Getty Images.

The only expenses that are likely to disappear in retirement are your commuting and job-related costs, and your retirement plan contributions. The rest of your expenses are highly likely to stay the same, or even go up to a certain degree. After all, you'll need food in retirement just like you did when you were working. You'll also need housing, transportation, clothing, utilities, and other such necessities that are by no means a function of having a job.

And if you think your housing costs will decline a bunch if you pay off your mortgage prior to retirement, think again. As homes age, they tend to require more maintenance, and as people age, tackling that maintenance themselves starts to prove challenging. Throw in the fact that property taxes have a tendency to rise over time (even during periods when home values decline), and it could very well be that case that you do indeed eliminate your mortgage payment in time for retirement, only to have it replaced with other housing expenses.

Then there are healthcare and leisure to consider -- two expenses that often go up in retirement. The former often rises because health issues tend to creep up and escalate as people age, and while Medicare can help pick up the tab for healthcare matters, there are a number of key services the program won't cover. Also, Medicare is by no means free -- between premium costs, deductibles, and copays, even covered services could cost you a small fortune.

Similarly, being retired means having more free time on your hands, and occupying that time is apt to cost money. As such, you might easily spend more on leisure as a senior than you did as a working adult.

Boost your savings while you can

Hopefully, by now you're at least somewhat convinced that retirement may end up being a more expensive prospect than you initially assumed it would be. The good news is that if you ramp up your savings game, you have a shot at accumulating enough of a nest egg to cover the aforementioned senior living costs, and then some.

Let's assume you have a good 30 years until you're set to retire, and that you're able to invest your savings in a manner that generates an average annual 7% return during that period. (This should be more than doable with a stock-heavy portfolio.) Here's what your ending nest egg balance might look like based on your monthly contributions:

Monthly Savings Amount

Total Accumulated Over 30 Years at an Average Annual 7% Return










$1.13 million

Data source: Calculations by author.

You have to admit, those are some pretty impressive numbers, especially as you work your way down the table. Therefore, don't stress about the fact that retirement will cost a lot of money. Rather, accept it, and do your best to save appropriately. If you skimp on savings under the assumption that you'll spend a whole lot less as a senior, you'll likely wind up very sorry for it after the fact.