Are you looking forward to retirement? If you are, chances are good you have some fun plans for how you'll spend your time. 

The problem is, most of those plans probably cost money. And if you receive the average Social Security benefit and have the average amount saved for your later years, you may not have much of it. 

Older couple sitting on bench looking at the beach.

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The average American could end up with way too little cash in retirement

Most retirees have two primary sources of income: Social Security benefits and money from savings. Unfortunately, data on average retirement benefits and average investment account balances show why so many people are going to face financial trouble in retirement.

In 2020, the average Social Security benefit is just $1,503 per month, which provides an income of $18,036 annually. And Fidelity also reported the average 401(k) balance in the second quarter of this year was just $104,400. Those who follow the 4% rule would end up with $4,176 in annual income from an investment account of that size.

If you do the math, a typical American with an average-sized retirement account and an average Social Security check would have just $22,212 in income each year. And this is the reality millions of American seniors are living with, as the Pension Rights Center reports half of all Americans ages 65 or older have incomes under $24,224 annually. 

While those who live in a household and can combine their Social Security benefits do a little better than single seniors, far too many retirees simply do not have enough savings to supplement their Social Security benefits, and end up struggling because of it. 

Amassing a larger nest egg is critical if you don't want to live on $22,212

If you don't want to spend your later years struggling to live on an income that's barely enough to provide the basics, saving aggressively throughout your career is the only option. Most people won't receive pensions, and while you can raise your Social Security benefit by delaying claiming it, it's still not going to be enough to serve as your sole or even primary source of support. 

While it may take time to work up to it, you should aim to save around 15% of your income. Setting up automated contributions to a 401(k) or IRA can help you make that happen. It's also important to invest your retirement money wisely, with an appropriate percentage of your nest egg in the stock market so you can earn reasonable returns but aren't exposed to outsized risks. Taking advantage of tax breaks for retirement savings and earning your full employer match (if your company provides one) can also help. 

Of course, if you're already in retirement and are left coping with the average savings and Social Security checks, it may be too late to take most of these steps. However, you can consider returning to work -- even part-time -- to raise your income, or relocating to a lower-cost-of-living area so your money stretches farther. 

Living on such a low income will require sacrifice, so always try to make sure you don't have to do it -- but if it's too late to save more, the sooner you act to lower your cost of living, the better off you'll be.