3/4 of Retirees Don't Have Enough Money to Cover Their Expenses. Here's How to Fix That

To maintain your standard of living in retirement, you will need to replace at least 70% of your working income.

Many retirees fall short of their retirement income goals, according to research from Goldman Sachs Asset Management. The survey, which polled 1,566 U.S. participants between July and August 2022, found that many retirees are not able to achieve their desired level of income in retirement.

According to the firm's research, only 25% of retirees generate that amount of income. Meanwhile, more than half of retirees (51%) make do with less than 50% of their pre-retirement income.

The gap between what people have saved for retirement and what they actually need is not surprising, considering that more than 40% of people who are still working say they are behind schedule on their retirement savings. Members of the Gen X generation, who are sandwiched between millennials and baby boomers, were most likely to say they are behind on retirement, with more than 50% reporting that they are behind on their savings.

Savers may find it difficult to balance their competing life goals and financial priorities, known as a financial vortex. This can be especially challenging for those who also have other roles such as parents or caretakers, or homeowners or renters.

"It can be difficult to prioritize retirement savings when you have so many other competing financial priorities," said Mike Moran, senior pension strategist at Goldman Sachs.

There are steps you can take to meaningfully increase your cash flow in your later years and improve your chances of meeting that 70% income replacement ratio. If you're still working, consider ways to increase your earnings and reduce your expenses. You may also want to think about ways to generate additional income through investments or other sources.

The U.S. debt ceiling could have a big impact on Social Security and Medicare. If Congress doesn't raise the debt ceiling, it could mean big cuts to these programs. If you're approaching 62, it's important to understand how the cost-of-living adjustment could affect your benefits. And if you're dealing with long Covid, you may find it tricky to apply for Social Security benefits.

"You can reduce your cost of living now and need less income in retirement," according to Sharon Carson, a retirement strategist at J.P. Morgan Asset Management. Ask yourself whether you spend less than you make.

"If you're not already doing that, that's the perfect place to get started," she said.

Ted Jenkin, CEO and founder of Oxygen Financial and a member of CNBC's Financial Advisor Council, said that he recommends a 21-day budget cleanse in order to help people cut back on their spending. This cleanse involves evaluating your spending habits and making adjustments accordingly. By doing this, you can become more aware of your spending patterns and make changes to help you save money.

For 21 days, compare the prices of every bill you have to see if you can get a better deal.

Even if your budget is tight, increasing how much you set aside for retirement by even 1% of your salary can make a big difference when you eventually need to draw on that money.

Retirement experts at J.P. Morgan Asset Management recommend saving 15% of your salary for retirement, including any company match.

You may not be able to achieve a 15% return on investment right away.

Carson pointed out that if you can do something every year, you have the long-term advantage of compounding.

If you don't have access to a 401(k) or other retirement savings plan through your employer, you're not alone. According to estimates, as many as 57 million Americans lack access to a workplace retirement savings plan.

You can still contribute to an individual retirement account (IRA) with pretax money, or with post-tax money through a Roth IRA. Some restrictions apply, though. For example, there may be some limits on pretax contributions if your spouse has a workplace retirement plan. And post-tax Roth contributions may depend on your income.

Many states are also providing retirement savings programs to workers who lack access to employer plans. This is a great way to help those workers save for their future.

According to a survey by Goldman Sachs, the number one preferred source of retirement income for retirees is investments. If you want to get more income from your portfolio, Moran suggests considering dividend-paying stocks or municipal bonds.

Carson said that the key to making money in the stock market is to stay invested and not to try to time the market by putting your money in and out.

It's true that losses can be painful. But trying to time the market is often a losing proposition, because the market's worst days tend to be followed by its best days.

Carson noted that if you try to time the market, you need to be right twice.

The later you wait to claim Social Security retirement benefits, the higher your monthly payments will be. If you wait until age 70, you will receive the highest possible payments.

If you start claiming your benefits at age 62, they will be reduced.

At full retirement age, you will receive the full benefits you earned. This age varies depending on when you were born, but is typically between 66 and 67.

If you wait to start collecting Social Security benefits past age 62, you could be eligible for up to an 8% increase in benefits for each year you delay, up to age 70.

Even with a historic high 8.7% cost-of-living adjustment this year, experts say it's still smart to wait.

The COLA (cost-of-living adjustment) increases your primary insurance amount, which is the benefit you're entitled to at full retirement age. The longer you delay claiming your benefits, the higher they will be. This means that the annual cost-of-living adjustments will have a greater impact on your benefits.

Annuities have become a popular way to create a stream of income in retirement, as pensions have become less common. With an annuity, you sacrifice a lump sum of money upfront in exchange for a steady stream of monthly payments during retirement.

A deferred annuity can provide income at a future date, which can be helpful if you’re worried about running out of money later, according to Moran.

Some annuities offer immediate payouts, while others offer variable payouts that can be more attractive. Jenkin noted that some of these annuities come with guarantees that can be appealing to investors.

Since these contracts are legally binding, it is important to proceed with caution.

Jenkin advised to be aware of fees and costs, and to be cautious of products that are promoted at dinner seminars.

He advised that the best course of action would be to hire somebody to do the shopping for you, by the hour, rather than paying somebody a fee or commission.

According to Goldman Sachs’ research, the second most preferred source of retirement income is part-time work. This option allows retirees to supplement their income and maintain a level of social interaction and purpose.

According to Moran, there are many benefits to working after retirement. Your income may not disappear entirely when you retire, and you may still get the social benefit of interacting with colleagues.

The extra income you earn can help you delay Social Security benefits or withdraw less from your retirement portfolio. This can help make sure your money lasts longer for the years to come.