Your golden years may be some of the best years of your life, but they can also be some of the most expensive.
Multiple factors contribute to the rising costs of retirement. Healthcare expenses, for example, continue to increase, and the average American in their 40s now can expect to spend roughly $335,000 on healthcare alone in retirement, according to estimates from Urban Institute. Long-term care is another cost that could potentially break the bank, with a semiprivate room in a nursing home costing approximately $6,800 per month, according to the U.S. Department of Health and Human Services.
On top of that, life expectancies continue to increase, and a third of today's 65-year-olds are expected to live into their 90s or beyond, the Social Security Administration reports -- meaning retirees are spending more years in retirement than ever. With all this combined with the facts that Social Security is on shaky ground and there's a possibility of benefit cuts in the next few decades, Americans have their work cut out for them when saving for retirement.
So it should come as no surprise that most workers have high expectations for what they need to save. Though the numbers differ slightly by generation, the general consensus is that workers need to save more than ever to ensure a comfortable retirement.
Today's workers have lofty retirement goals
Retirement is more expensive than ever, and workers realize it. The average baby boomer expects to need around $1.51 million saved to enjoy a comfortable retirement, according to a survey from Schwab Retirement Plan Services. Millennials have even higher expectations, saying they think they'll need to have around $1.78 million saved by the time they retire. And Generation X has the highest goals of all, expecting retirement will cost roughly $1.81 million.
Those are impressive numbers, and although they may seem intimidating, they might also be right on the mark. The average adult age 65 and older spends around $46,000 per year, according to the U.S. Bureau of Labor Statistics. If you retire at 65 and spend 30 years in retirement, spending at that rate adds up to a total of close to $1.4 million -- and that's not accounting for the effects of inflation or any other major expenses like healthcare or long-term care.
Of course, it's still important to take your own individual situation into account when crunching the numbers rather than relying on what the average person your age thinks they need to save. You could need more or less than average, and calculating your retirement number based on your own situation will give you a more accurate picture of what you should be saving.
How to save for retirement when you don't have much cash to spare
Knowing you may need to save well over $1 million by the time you retire can be an overwhelming thought -- especially if your retirement fund is looking a little sparse right now. The good news is that it's easier than you may think to save more for retirement, even if you don't think you have much to spare.
Nearly 60% of Americans say they're living paycheck to paycheck, according to a survey from Charles Schwab. If you're one of them, it might feel like you're too strapped for cash to set anything aside for retirement. However, the same survey also found that the average American is spending around $483 per month on nonessential costs. This suggests that although most workers may feel like they don't have anything to save, perhaps they simply don't realize how much they're spending unnecessarily.
Creating a thorough budget can help solve this problem because it allows you to see exactly where all your money is going each month. Without a budget, you may not realize just how much you're spending on takeout, various subscription services, or that gym membership you rarely use. All these costs add up quickly, and by cutting anything you don't need, you could potentially save hundreds of dollars each month.
If you've already trimmed your budget down to the bare bones and are still struggling to save, there are other things you can do to give your retirement fund a boost. For example, try picking up a side hustle to bring in a few extra dollars each week. This job doesn't need to be incredibly time-consuming. Sometimes something as simple as walking dogs in your neighborhood once or twice a week or driving for a ridesharing service on the weekends can earn you an extra couple hundred dollars per month. Setting all that money aside in your retirement fund can go a long way over time.
Saving for retirement can be stressful, especially as costs climb and you need to save more than ever. But if you give up before you ever get started, it's a guarantee you'll never reach your goal. By taking baby steps and saving as much as you can right now, you'll be on the right track to a comfortable retirement.