Saving for retirement when you don't make much money can be a terrible burden, but a recent analysis of economic information commissioned by the nonprofit Wider Opportunities for Women showed why making the sacrifice and having the fortitude to commit to regular savings is a retirement planning necessity.
The study starts with the calculation from government data that in order to live modestly in retirement without assistance from the government or social agencies, a fully retired single adult who rents requires $19,536 per year to cover basic expenses; a fully retired couple who rent require $26,064. By comparison, the average Social Security recipient gets about $1,177 per month or $14,124 per year. For a single person, that's $5,412 less per year than this study calculates that it takes to just get by.
The budget on which these calculations is based is no-frills, says one of the study's authors, Michael Sherraden, director of the Center for Social Development at Washington University in St. Louis. "It isn't much. If people only have this much, they are going to have a tough time."
The study says that relatively modest savings -- $73 per month, which could be invested for 40 years at a 6 percent annual return (an average of what a combo of stocks and bonds earned over the last 50 years) -- will net this saver more than $150,000 when he retires. At current annuity rates, according to ImmediateAnnuities.com, a $150,000 purchase will earn this saver about $1,000 per month or $12,000 per year for life.
That amount added to Social Security will certainly make the difference between eking out a living and having enough money to handle emergencies and enjoy a splurge now and then. Let's hope we're all so lucky.