There's a reason workers are urged to save for retirement, even if it means having to make sacrifices in order to do so. You might face a host of expenses once your career comes to a close, from housing to food to healthcare. And if you expect Social Security to cover your expenses in full, well, you'd be wrong.
Social Security will replace about 40% of your pre-retirement wages if you're an average earner. But that figure doesn't account for benefit cuts, which are a distinct possibility in a little more than 10 years from now.
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And besides, most seniors need a lot more than 40% of their former paychecks to cover their costs. So even if benefits aren't slashed, retiring on Social Security alone is not a great idea.
That's why it's so important to go into retirement with a decent-sized nest egg. But what if building savings just isn't doable for you?
If so, you might tell yourself you'll just keep working as a retiree to make up for not having savings. But while that's not a terrible idea in theory, you may have a hard time sticking to that plan in practice.
When your health just won't cooperate
Many people enter retirement in decent health only to have it decline in their late 60s or 70s. Sometimes, that's just a fact of aging.
But poor health could make it so that you're unable to hold down a job as a retiree. So if your plan to make up for an absent nest egg is to simply work your entire life, you may need to rethink it.
Remember, even if your health stays relatively strong in retirement, you may not have the energy you have now, when you're much younger. So while your body might function well enough for you to work a little, you might have to limit your hours so you don't physically burn out.
Also, you might think you won't mind working as a retiree. But your opinion there might change as you age.
You might resent having to hold down a job in your 70s when you've worked your entire life. And that could be a source of unhappiness at a time when you deserve better.
That's why you may not want to plan to fall back on working in retirement as a solution to not building a nest egg. Instead, you may be better off pushing yourself to cut a few bills or work a side job now, while you're younger, to pump money into an IRA or 401(k) plan.
Another thing to keep in mind is that even if you're in a solid enough position to hold down a job as a retiree, we don't know what the economy will look like at that point. Being older can work to your disadvantage when it comes to getting a job, even though it's illegal to discriminate against older applicants based on age alone. So all told, your best bet may be to plan on working in retirement -- but do your best to build some savings in case your plans don't end up being feasible.
