Not having enough money in retirement is a legitimate fear, and one that many Americans may need to grapple with once their time in the workforce comes to a close. It's estimated that 40.6% of U.S. households, where the head of the household is between ages 35 and 64 will run short of money during their senior years, according to the Employee Benefit Research Institute (EBRI). All told, Americans in this age range face a collective $3.83 trillion retirement income deficit when we factor current Social Security benefits into the mix.

Clearly, that's some pretty daunting news. But while the EBRI's model may have a dire forecast on a collective level, that doesn't necessarily mean you'll wind up cash-strapped once your career comes to an end. In fact, if you play your cards right, you may find that you end up retiring with more-than-enough money to pay your bills and enjoy a comfortable lifestyle.

Pile of hundred-dollar bills

Image source: Getty Images.

How to avoid an income shortfall in retirement

The idea of having inadequate funds to pay your living expenses in retirement is undeniably scary. But there's a potential solution: Save and invest aggressively during your working years.

If you decide that your primary income source during retirement will be none other than Social Security, whose meager raises barely allow seniors to keep up with inflation, then you may be in for a financial shock once you leave the workforce behind. But if you make an effort to save independently and save well, then you'll lower your risk of winding up short.

How much money should you set aside for retirement? A good rule of thumb is to aim to sock away 15% to 20% of your earnings (more if possible) in a 401(k) or IRA. Furthermore, you'll want to invest your savings aggressively for maximum growth, and that means loading up on stocks, especially when you're younger and retirement is a good number of years away.

How much savings might you accumulate?

The amount of savings you're able to amass in time for retirement will depend on how early you start building your nest egg and how well your investments perform. But here's a snapshot of the wealth you might build if you give yourself a 35-year savings window and go heavy on stocks in your portfolio:

Monthly Contribution

Ending Balance After 35 Years at
Average Annual 7% Return








$1.33 million


$1.66 million

Table by author.

Of course, you may not have 35 years between now and retirement, or you might have an even longer savings window at your disposal. And also, your investments may or may not deliver a 7% average annual return. As such, the above numbers aren't an exact benchmark to go by -- they're merely an illustration of the amount of wealth you might wind up with. The point, however, is to see what it takes to reach different savings levels so you can plan your nest egg-building strategy accordingly.

Either way, be sure to prioritize your long-term savings as soon as possible. If you don't, you might retire dangerously short on income and struggle for years because of it.