I suspect that most working Americans, like me, are looking forward to retirement. It's a time I've seen referred to as "preferment" -- a time when you can do the things you prefer, not the things you're required to do to keep food on the table and the lights on.
But as millions of us march closer to retiring every day, there's danger afoot, as was revealed in a recent Motley Fool research report on Americans' readiness for retirement. Here's a look at some of its findings -- which might help you figure out whether you will be ready for retirement when the time comes.
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Millions are not ready for retirement
The Fool report starts out with this depressing news: "47% of working households are in danger of not having enough retirement savings, according to analysis from the Center for Retirement Research at Boston College." It added that, "The median retirement account value in 2023 was $87,000."
Those numbers seem to fit with the findings below, from the 2025 Retirement Confidence Survey:
|
Amount in savings and investments* |
Percentage of workers |
|---|---|
|
Less than $1,000 |
16% |
|
$1,000 to $9,999 |
9% |
|
$10,000 to $24,999 |
7% |
|
$25,000 to $49,999 |
7% |
|
$50,000 to $99,999 |
12% |
|
$100,000 to $250,000 |
13% |
|
$250,000 or more |
37% |
See? Fully 51% of workers have less than $100,000 socked away, and 32% have less than $25,000. Such low sums can be OK for workers in their 20s or 30s, but as we enter our 40s and 50s, our retirement savings programs should be well under way, and, ideally, we should have bigger nest eggs growing.
How big a nest egg do you need?
So how much should you sock away? There's no single answer that suits everyone, but the flawed-but-still-helpful "4% rule" can help you get an idea. It suggests that retirees can withdraw 4% from their nest egg in their first year of retirement and then adjust subsequent annual withdrawals for inflation. The table below shows how much you'd withdraw in your first year of retirement with nest eggs of various sizes:
|
Nest Egg |
4% First-Year Withdrawal |
|---|---|
|
$250,000 |
$10,000 |
|
$300,000 |
$12,000 |
|
$400,000 |
$16,000 |
|
$500,000 |
$20,000 |
|
$600,000 |
$24,000 |
|
$750,000 |
$30,000 |
|
$1 million |
$40,000 |
|
$1.5 million |
$60,000 |
|
$2 million |
$80,000 |
|
$2.5 million |
$100,000 |
Source: Author calculations.
Clearly, those who are approaching retirement soon with even a $250,000 nest egg are facing trouble. That $10,000 withdrawal likely won't last long, even when paired with Social Security benefits -- which averaged about $2,008 per month as of August (which comes to about $24,000 over a year).
It's worth taking some time to develop a realistic idea of how much income you'll likely need in retirement -- and then to figure out how you'll get it. Here's a list of likely spending categories to start with:
- Groceries
- Dining out
- Clothing
- Healthcare
- Transportation
- Insurance
- Utilities
- Entertainment
- Education
- Travel
- Gifts
- Charity donations
- Memberships
- Household expenses, maintenance, and repairs
- Taxes
What should you do?
So -- what can you do, especially if you're behind in your retirement savings? Here are some ideas:
- Save aggressively and invest effectively (such as in an S&P 500 index fund) via a regular, taxable brokerage account, a 401(k), and/or an IRA, among other options.
- Consider working a few more years, if you can. Delaying your retirement means your nest egg will have to last for fewer years, and you can beef it up more before retiring. You may also be able to remain on an employer-sponsored health insurance plan for longer, potentially saving money.
- Consider delaying claiming Social Security until age 70, if you can. This won't work if you simply need the income sooner, but for most people, age 70 is the best age at which to claim your benefits in order to maximize them.
- Perhaps take on a part-time job for your first few years of retirement -- or a side gig such as making and selling things or giving music or language lessons.
- Think outside the box. If you need more income during retirement, you might take in a boarder or look into a reverse mortgage.
Know that all is not lost, even if you're one of the many millions of Americans who aren't ready for retirement. There's likely still time to improve your financial condition.
