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When planning for retirement, it’s easy to target a “magic number” — like $1 million — just because it seems like that’s what other savers are doing. But it’s possible to retire even without a nest egg that large. Doing so requires taking a closer look at your lifestyle and expenses.
Some people can happily retire with less than $1 million if their priorities don’t include luxurious lifestyles. Here’s what you need to know about retiring with less money.
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Rethink what comfortable means
Your needs change over time, and acknowledging those changes can help bust the myth that you need $1 million to retire. For instance, when young adults start families, they often buy houses large enough to accommodate multiple children.
However, that same house may feel empty when the children become adults. Downsizing can make sense, and opting for a smaller house can reduce your monthly payments.
Cut costs, not happiness
Cut down on activities that don’t enrich your life to save money. Getting rid of unused subscriptions and memberships, for instance, and instead investing that money will give your portfolio more mileage. Opting for lower-cost tiers of those subscriptions or memberships is another option. The lower your expenses, the more likely you’ll be able to cover them with Social Security paychecks and other forms of income.
Review your recent credit card statements to assess which expenses are unnecessary.
Make your income work harder
Instead of saying goodbye to your job completely, you may want to consider a semi-retirement. A part-time job or side hustle can bring in some extra cash while allowing you to enjoy a retired lifestyle. These gigs can align with your hobbies and passions, making the work fun instead of mundane.
You can also put your money to work in assets that generate cash flow, such as dividend stocks and bonds. And rental income can act as a solid good source of cash flow if you have enough money to buy a small property or already own one. Some retirees list their properties on sites like Airbnb and rent out one of their rooms. This gives you the flexibility to make certain days and weeks unavailable for booking.
Redefining success
How much money do you really need? The answer will be specific to you, your situation (such as where you plan to retire) and your goals. Some people will be able to buy fewer material things and be happy, allowing them to use that extra money to pay off their debt or invest, and requiring a smaller pool of money for expenses. Financial security can translate into emotional security, which may be worth more than any material items.
So remember that even if it seems like everyone around you is aiming to have $1 million in retirement, that particular goal may not be necessary — or make sense — for you.
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