Behind on Retirement Savings? Here's a New Reason to Worry Less

There's a reason so many financial experts talk of a retirement crisis. It's estimated that one out of every three Americans has absolutely no retirement savings, while 30% of baby boomers 55 and over have yet to begin building a nest egg. Yet current retirees are in surprisingly good spirits despite the fact that many entered this new stage of life behind on savings.

According to a recent Transamerica study, only 45% of retirees say their finances are as intact as they were prior to the most recent recession. And while 35% have partially recovered, 8% have not yet begun to recover, and 12% are convinced they won't ever recover at all.

Despite all that, an overwhelming number of retirees identify as happy. An estimated 90% are content and enjoying life, even if their savings aren't where they should be -- and that's good news for soon-to-be retirees who may have concerns about their own limited savings. But while you may be able to enjoy a fulfilling retirement on less, that doesn't mean you can get away with saving nothing at all. And the sooner you recognize that difference, the more opportunity you'll have to make up for lost time.

You can't save nothing

It's one thing to be behind on retirement savings, which is the case for most Americans, but it's another thing not to have any savings at all. Transamerica reports that retirees have a median savings balance of $119,000, which may seem like a decent amount at first glance. But when you consider the fact that seniors are living longer, that number starts to erode. Over a 20-year retirement, for example, that amount leaves you with income of just $5,950 a year, or slightly less than $500 a month.

Of course, there's also Social Security, which many retirees depend upon heavily. But Social Security will only replace about 40% of the average worker's pre-retirement income, and most seniors need a good 70% to 80% to stay afloat financially. In fact, currently, the average Social Security recipient receives $1,360 a month in benefits. Add in $500 based on the aforementioned median savings balance, and you're looking at just $1,860 a month in total income, or $22,320 a year -- hardly enough to pay for much more than the basics.

But while $1,860 a month doesn't allow for much financial flexibility, imagine paying the bills on just the Social Security portion of that total. Even the most naturally frugal folks among us can't live on just $16,320 a year -- especially when you consider the fact that today's retirees might pay as much as $377,000 per couple in healthcare costs during retirement. Even when you divide that figure in half, you're still talking $9,425 a year in medical expenses per retiree. If you don't have your own savings, you could run into serious financial trouble once those bills start coming in

There may still be time to catch up

While you don't need a $2 million nest egg to enjoy a rewarding retirement, you must save enough to cover the basics at the very least, like housing, healthcare, transportation, food, and utilities. As long as you still have a few working years left, you have a good opportunity to build up some savings to buy yourself a modest yet comfortable lifestyle.

Currently, workers 50 and older can contribute up to $24,000 a year to a 401(k) and $6,500 to an IRA. Even if you can't max out these limits, every little bit counts.

Imagine, for instance, that you're 57 years old and want to retire in 10 years. If you were to save just $300 a month and invest that money at a relatively conservative 5% average yearly return, after a decade, you'd have $45,000. Postpone retirement one extra year and keep saving, and you'll be looking at $51,000.

If you're within a year of retirement, or if you're forced to retire earlier than expected, then you may not have the option to save and invest -- but that doesn't mean you can't do anything to help your situation. Working part-time in retirement, for example, is a great way to generate income while giving yourself something to do with a portion of your newfound free time.

They say that money doesn't buy happiness, and clearly, having a lot of it is not a prerequisite for a gratifying retirement. But if you don't save anything at all, you could be in for a major struggle during your golden years. While you may not need a lot to be happy, you do need a roof over your head, food on the table, and enough financial resources to age with dignity.