Many workers neglect their nest eggs thinking they don't need retirement savings of their own. The problem? They're wrong.

If you expect to pay your bills on Social Security alone in retirement, you may be in for quite the nasty shock when you realize those benefits amount to less than $18,000 a year. That's on par with what the average recipient collects today, and even if you're not set to retire for quite some time, and will therefore collect a higher benefit as payments are adjusted for inflation, you should know that if you're an average earner, Social Security will only replace about 40% of your pre-retirement income, and that most seniors need a good 70% to 80% of their former wages to live comfortably.

Now if you're privy to a generous pension and have other income sources to tap in retirement, like a paid-off, valuable home you're planning to sell, then you may be able to relax a bit on the retirement savings front. But if you have no obvious source of income to look forward to during your golden years, then you'll need to make an effort to save as much as you possibly can, while you can.

Older man and woman looking at receipts


Unfortunately, recent data from the Center for Financial Services Innovation reveals that 42% of Americans aren't saving any money at all for retirement. If you're part of that statistic, consider this your urgent wakeup call to start doing better, or risk struggling financially once your career comes to a close.

Don't expect your living costs to change drastically in retirement

Many workers anticipate their bills going down in retirement and thus ignore their savings accordingly. But while you may have your mortgage paid off by the time your golden years roll around, and you may spend a lot less on fuel for your vehicle once you no longer have a job to commute to, the rest of your bills are likely to stay the same or even go up. In fact, you should expect your healthcare costs to rise in particular, as well as your property taxes and home maintenance costs, which have a tendency to climb over time.

That's why you can't expect to live on just 40% of your former income. And if you think you can, ask yourself this: Will eliminating a mortgage payment and a commute really make up for a 60% pay cut, especially at a time when other bills of yours could rise?

Build your nest egg

If you've been neglecting your nest egg thus far but are still not too deep into your career, then rest assured that all is not lost. If you're able to cut back on spending to the point of socking away $300 a month, and you invest that money at an average annual 7% return, which is a few percentage points below the stock market's average, here's what your savings balance could amount to:

If You Start Saving $300 a Month at Age:

You'll Have This Much Money by Age 67 (Assumes a 7% Average Annual Return):












Now, if you're still decades away from retirement, you'll do pretty well for yourself socking away $300 a month. If you're closer to ending your career, well, that's a different story -- in that case, you may need to make some serious lifestyle adjustments to free up more than $300 a month for savings. You may also need to consider extending your career, which will not only allow you to save more, but also, potentially grow your Social Security benefits by delaying them so you collect more money each month.

If you're planning to exist on Social Security alone in retirement, you're effectively signing up to be cash-strapped throughout your golden years. But if you make an effort to build some savings, you'll get to enjoy life at a time when you really deserve to.