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Curious how your retirement nest egg measures up to other retirees? You're not alone. Retirement expenses such as healthcare can take a big toll on lifetime savings, and for that reason, understanding how your financial situation stacks up to other retirees can be useful, especially if it leads to proactive changes to your spending or savings plans that help guarantee your financial security.
The typical retiree's savingsAccording to a study by TransAmerica, the average retiree's retirement savings at the time of retirement is a median $131,000. Couples retired with a median $225,000, and single retirees' nest eggs are $53,000.
Digging deeper into the data shows that there's wide disparity, however, among retirees.
More than one in 10 retirees reports having less than $5,000 in a retirement account at retirement, and nearly 30% of all retirees retire with less than $100,000 in retirement savings.
Coming up shyIt's typically recommended that retirees withdraw no more than 4% of their nest egg per year in retirement, so the median savings of retirees today appears to be too little to support retirement expenses on its own. Retirees with the median $131,000 in retirement savings are withdrawing just $5,240 from their savings annually, if they're sticking to the 4% rule.
Obviously, that's not enough money to live comfortably on in retirement; especially considering the average annual expenses for a retired American couple over 65 totaled $41,403 in 2013.
Given that backdrop, it's not surprising to learn that 61% of retirees TransAmerica surveyed said that Social Security was their primary source of retirement income, or that most respondents began receiving their Social Security at age 62, the earliest age possible.
Social Security income may not seem like a windfall (the average person receiving Social Security gets $1,341 per month and the average couple pockets $2,212 per month), but it certainly does a lot of the heavy lifting when it comes to paying the average retiree's monthly bills.
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Making it lastSome retirement expenses are more easily controlled than others. Unfortunately, healthcare expenses aren't one of them.
Advances in healthcare are allowing retirees to live longer than ever before, but these advances are also increasing the risk that retirees will outlive their retirement savings. According to HealthView Services, the average 65-year-old healthy American couple will spend$395,000 on healthcare-related expenses during retirement, not including costs for long-term care.
Since health insurance premiums and healthcare cost-sharing could eventually end up taking a big bite out of the average retiree's monthly income, it makes sense to plan ahead for these expenses as soon as possible.
Sticking to the same financial disciplines that helped you build up your nest egg, such as budgeting, can help. Budgeting may not be fun, but it's the arguably the most important step to take to ensure your savings last longer.
When budgeting in retirement, make sure to include all your income sources, including pensions, and expenses, including spending on impulse purchases. If in reviewing your monthly spending habits you discover that too much is being spent on impromptu purchases, consider re-embracing cold, hard cash. Studies show that people spend less when they're handing over real money than they do when they're swiping a card.
It's also important to remember to include savings in your monthly budget. It may be tempting to think that part of your life is behind you, but with life expectancy stretching into the 80s, socking away money in your 60s and 70s has become de rigueur.
If you're unsure where to put your savings in retirement, consider stashing this money away in a Roth IRA. It's likely that you'll be below the annual income limit that allows you to contribute to one, and since contributions to Roth IRAs can grow tax free, and Roth IRAs don't require minimum distributions like traditional IRAs do, this money can really pile up. When it does, you can tap it to pay for your medical expenses, or pass it along to your heirs as part of your estate if you don't.
Overall, if you're retirement savings are shy of the median that your peers have saved, don't fret. With some smart planning and attention to detail, you should be able to find ways to make that money last.
The article Retired? Here's How Your Retirement Savings Compare With the Average American originally appeared on Fool.com.
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