Saving a hefty nest egg is essential if you want to enjoy life as a senior, especially since Social Security will give you barely enough income to live above the poverty level. Sadly, millions of Americans have nowhere near the amount they need.

In fact, a study from Northwestern Mutual showed that 22% of Americans have saved just $5,000 or less for retirement, and 15% have saved nothing at all. And it's not just young people with almost nothing saved. Around 17% of baby boomers and 21% of Gen-Xers have no more than $5,000 in retirement accounts, while just over 20% of people in both of these demographic groups also have less than $5,000 in personal savings. 

Getting into middle age with just $5,000 saved is a disaster, and reaching your 60s with such a small amount is a financial catastrophe. If that applies to you, there may still be time to salvage your retirement -- but only if you act very quickly. 

Retirement savings jar with money spilling out of it.

Image source: Getty Images.

Retirees need much more to survive

As a retiree, chances are your two primary income sources will be Social Security and savings. Social Security's average benefit was just $1,503 in 2020, so if your benefit is in line with the average, it will give you just $18,036 in annual income. Most retirees need substantially more than that, especially given the potential for high healthcare costs in your later years. 

If you have just $5,000 saved, your nest egg will provide almost no supplementary income. If you follow the 4% rule and withdraw just 4% of your account balance, $5,000 in savings would produce $200 per year in income. When combined with the average Social Security benefit, that would still leave you under $19,000 to live on. That's a huge problem since the Bureau of Labor Statistics indicates average annual expenditures for those 65 and over topped $50,000 in 2018. 

How to handle having too little saved for retirement

If you have hardly any money saved for retirement but you're still working, take heart: You have time to turn things around. You just need to prioritize saving. Make a budget if you don't already have one. That budget should treat retirement account contributions as an essential bill, along with your mortgage or rent and car payments. Aim to save at least 15% of your income, or more if you're starting very late.

Chances are good you'll find it challenging to contribute so much to retirement accounts, especially if you aren't in the habit of saving yet. In fact, when you look at your budget, hitting this savings target may feel impossible. But take a close look at areas where you can make big cuts. For example, if you opt for a cheaper car, downsize your home, or get a roommate, this could free up the funds you need. You can also look for cuts to discretionary spending, but sometimes one big change is easier to make than cutting lots of small stuff. 

If you can't or won't cut your spending enough to lift your savings, earning extra income is also a good option. You could pick up a side job for a few hours each weekend or evening, and use the extra money to save for retirement. 

For those already in retirement or very near to it, these options may not be available or may not be enough if you have only $5,000 or less saved. You may need to dramatically downsize your lifestyle, perhaps by selling your home to access the equity to invest, and moving to an area with a lower cost of living where your Social Security benefit and limited savings can more easily support you. 

Don't let a lack of savings doom your retirement

If you have just $5,000 or less saved for retirement, you still have time to supercharge your savings if you're still working. And if you're very close to retirement, making lifestyle changes could make it easier to survive on the income you have.

The key is to be smart about making your money last and to make sure you save as much as you can for as long as possible to build a nest egg that can provide at least some measure of financial security.