When you are getting close to retiring, you need to make sure your nest egg is large enough to supplement your Social Security benefits.
The reality is, with Social Security only replacing 40% of your income, you can’t live on these benefits unless you have other money coming from somewhere or plan to live a very meager lifestyle and hope you don’t face high healthcare costs.
If you have just $250,000 in your investment portfolio and your retirement date is arriving, you may be wondering if that’s enough or what you should do next. Here’s what you need to know about getting close to retirement with such a small amount saved.
Determine what $250,000 will actually do for you
If you have just $250,000 invested for retirement when you’re getting near the age when you want to quit working, the first crucial task is to understand what $250K will actually do for you. Specifically, you’ll want to know how much income your nest egg will produce at a safe withdrawal rate.
One basic rule of thumb says you should withdraw 4% of your retirement accounts in year one and then adjust withdrawals to account for inflation. While there are some problems with this rule, including the fact that it may not hold up as well in a low-rate environment, it’s good enough to give you an idea of what your retirement with $250K would look like.
Based on this rule, your $250,000 nest egg would provide you with $10,000 in annual income. Chances are, that is nowhere near the 40% of your pre-retirement earnings that you need your nest egg to replace. And, if you combine that income from investments with an average Social Security benefit, which is around $2,015 per month for the average retired worker in 2026, you’d be looking at $34,180 to live on — unless you had lots of money coming from somewhere else.
As you can see, that’s not a lot of money, so you need to explore your options.
Explore other sources of income
The next thing you should do is to consider whether you have other places you could generate income from.
For example, while you may not have a lot saved, you may have a house that’s gone up in value over the years. If you have tons of equity in your home, selling it to cash that equity in and moving to a cheaper place could go a long way towards helping you create the financial security you deserve as a retiree if you invest the difference.
If you are married, your spouse may have income coming in, too. You should look at your combined household income with investments and Social Security to see if it’s something you can realistically live on.
Consider working a little longer
If you find that you don’t have enough money even when considering all of your potential income sources, working a little longer could be your best course of action — if you can make it happen. While delaying retirement longer than you’d prefer isn’t fun, it’s a lot better than being broke in your 80s.
Working longer could allow you to invest more and potentially increase your Social Security benefit by claiming it at a later age and by raising the average wages that benefits are based on if you are earning more than you did in the past.
Make plans for lifestyle changes if necessary
Finally, if you have to retire, can’t work longer, and don’t have other income sources, the only real option you have is to make lifestyle changes that will allow you to live on the money you have coming in. This may mean moving to a low-cost-of-living area and making sure you can live on a very tight budget.
A financial advisor can help you understand what this kind of lifestyle change would look like, how long your money is likely to last, and what options you have for trying to invest or work more to see if you can make your retirement a more financially secure one.
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