If you're falling behind on your retirement savings, you're not alone. Roughly a quarter of U.S. households have less than $1,000 stashed away for the future, according to a survey from the Employee Benefit Research Institute, and around half have less than $50,000 saved.
Although it's important to start saving early, if you're just a few short years away from retirement with little to nothing saved, that advice won't do you much good. You can (and should!) still save as much as possible between now and leaving the workforce, but unless you win the lottery or inherit a fortune, it's unlikely you'll be able to save hundreds of thousands of dollars or more in just a few years.
If that's the case, your best option is to start thinking about how you're going to maximize the money you do have. No matter how much (or little) you have socked away for retirement, there are a few steps you can take to make your money last.
1. Maximize your Social Security benefits
The amount you receive in Social Security benefits depends on the age at which you begin claiming. You can claim as early as age 62 or any age thereafter, but you won't receive the full amount you're entitled to each month unless you claim at your full retirement age (FRA). Your FRA depends on the year you were born, but it's either age 66, 66 plus a few months, or 67.
For a boost in benefits, though, you can wait until beyond your FRA to begin claiming. Although you can claim anytime after age 62, the latest you can claim and still earn extra money each month is age 70. So while you can delay claiming benefits until after age 70, there's no financial incentive to do so.
The best part about waiting to claim benefits is that the additional money you receive each month is for life. If your FRA is age 67, waiting until age 70 to claim will earn you an extra 24% every month for the rest of your life. For those who expect their personal savings to run dry after the first few years of retirement, these bigger checks can go a long way.
It's worth noting that it's not always the best decision to delay benefits. For example, if you have health issues or otherwise don't expect to spend many years in retirement, waiting until age 70 to claim might not make financial sense. But if you're planning on spending at least a couple decades in retirement, you'll likely come out ahead by waiting to claim.
2. Establish a savings withdrawal strategy
A fast way to sabotage your retirement plan is to withdraw too much too soon. It's especially important to have a withdrawal strategy in place if your savings are sparse, because the sooner your retirement fund runs dry, the more years you have to make do with less.
One common withdrawal strategy is the 4% rule, which states that you can withdraw 4% of your total savings during the first year of retirement then adjust that number each following year to account for inflation. The 4% rule is a good benchmark to get a general idea of how much you should be withdrawing each year, but it does have its flaws. For instance, it assumes your financial needs will remain static each year. In reality, though, they'll likely fluctuate year to year -- especially as you get older and healthcare costs take a bigger bite out of your budget.
You might opt to discuss your situation with a financial advisor, who can help you develop a strategy that fits your unique retirement needs. Regardless of what you choose to do, make sure you have some sort of plan for how much of your savings you can withdraw each year so you can avoid running out of money too soon.
3. Take care of your health
Healthcare is among the most significant expenses you'll face in retirement. Even with Medicare coverage, you can still expect to pay for all premiums, deductibles, copays, and coinsurance -- and all of these out-of-pocket expenses cost the average retiree around $4,300 per year, according to a study from the Center for Retirement Research at Boston College.
However, those who consider themselves to be in poor health spend approximately $1,700 more per year on out-of-pocket healthcare costs than do those in excellent health, a report from the Kaiser Family Foundation revealed. Over the years, that extra money adds up. And when your savings are limited to begin with, you likely can't afford to spend any more on healthcare than necessary.
Maintaining a healthy lifestyle can also help you stave off the need for long-term care -- something roughly 70% of retirees will need at some point, according to the Department of Health and Human Services. Long-term care can cost thousands of dollars per month, and it typically isn't covered by Medicare, so the longer you avoid it, the better off you'll be financially, too.
If you're nearing retirement age and your savings aren't up to snuff, you're not destined to live out your golden years in misery. It is possible to enjoy a comfortable retirement when your savings are less than ideal -- as long as you have a strategy in place to make the most of your money.