If you want to get yourself thoroughly depressed, spend a little time looking at statistics about Americans’ retirement preparedness. Some of the data are hopeful. Recent research from the Employee Benefit Research Institute, for example, indicates that seven out of ten American workers feel confident in their ability to retire comfortably. Strong stock market returns no doubt help on that front.

But that survey is about sentiment, and the actual data on retirement preparedness are more sobering. In Vanguard’s most recent How America Saves report, the average participant balance in Vanguard plans was $134,000 in 2023, but the median balance was just $35,000. For workers with Vanguard plans who were between ages 55 and 64, the average and median balances were $245,000 and $88,000, respectively, in 2023. Roughly half of people between age 55 and 66 have no retirement savings at all, according to U.S. Census Bureau data, and women are in worse shape than men from the standpoint of retirement preparedness.

Clearly, many people are hurtling toward a shortfall, or living through one. And for people who are dramatically undersaved and largely reliant on Social Security for in-retirement living expenses, there is no getting around the fact that their standard of living in retirement is going to be lower than it was when they were working.

Many other workers have some retirement savings—just not enough. People in that position tend to adopt one of a handful of tactics. The first set is defeatist: “My kids will just have to take care of me.” The second set is scrappy: “I am just going to keep on working.” The last group of people are looking to their investment portfolios to do the heavy lifting, hoping against hope that some combination of the right asset allocation and good investment picks will help make up for the shortfall.

Rather than looking to a single blockbuster solution to help make up for a savings gap, what if you were to consider a little bit of several prudent strategies—being willing to cut your standard of living a bit in retirement, working a bit longer, and investing a bit better, for example?

The virtue of taking several small steps--rather than relying on a single Hail Mary action—is that if one of the variables doesn’t play out as you thought it would, you may still be able to save your plan. Employing more modest changes around the margins of your plan means they apt to be more palatable from a lifestyle perspective, too; the thought of working until age 70 might not.

Meet the Shortfall Coverers
Before getting into a case study examining how several steps together can help put a plan on track, run through the key variables that investors have to choose from if, based on their current savings and savings rates, it looks like there is a risk that their retirement assets will fall short. Remember, you do not necessarily need to embrace each of these, but implementing several of these tacks together can help bridge a shortfall. Using an estimate of your Social Security benefit, as well as a good basic savings calculator, you should be able to fiddle around with the variables to help assess the payoff that each one delivers.

Work Longer
As preretirees have no doubt heard, working even a few years past traditional retirement age can deliver a threefer on the financial front, allowing additional savings and tax-deferred compounding, fewer years of portfolio drawdown, and perhaps delayed Social Security filing. Being willing to work part-time in retirement is another variation on this idea. As attractive as working longer looks by the numbers, it is a poor idea to make it the sole fallback plan, as many who plan to work longer are not able to.

Delay Social Security
This is another exceptionally powerful lever, allowing individuals to pick up an increase in benefits for every year they delay Social Security filing beyond their full retirement ages up until age 70. To pull this off, an individual may need to work longer or draw from a portfolio earlier.

Save More Before Retirement
The good news is that from a household budgetary standpoint, many individuals are best equipped to crank up their savings rates later in their careers. They are often in their peak earnings years, and other big-ticket preretirement expenses, such as home purchases and college funding, may be in the rearview mirror. The bad news is that with a shorter time horizon, those newly invested dollars will have less time to compound before they will need to withdraw them; the tax benefits that one gets from using tax-advantaged retirement savings vehicles like IRAs and 401(k)s also matter less (especially for tax-deferred contributions that entail RMDs) later in life. That does not mean that late-start retirees shouldn’t bother with additional contributions if they can swing them, though: Even an additional $5,000 invested per year, earning a modest average return of 4% for 10 years, would translate into more than $60,000 additional dollars in retirement.

Spend Less During Retirement
People who earned higher incomes will have more wiggle room in lowering their in-retirement expenses than people with lower incomes. The simple reason is that the former group is apt to have more discretionary expenses--and therefore could do more belt-tightening—than the latter group. Being willing to relocate to a cheaper home and/or a less-expensive location, while not for everyone, can deliver one of the biggest-ticket cost savings available to retirees.

Tweak Investments
Many preretirees confronting a shortfall focus their energies here, and certainly, a portfolio with a heavier stock mix will tend to have a higher long-term return than a more conservative one. Yet, it is a mistake not to temper a preretirement portfolio’s asset mix with safer investments. If a retiree’s equity portfolio falls sharply in the first years of retirement, that can permanently impair the portfolio’s ability to sustain itself over the retiree’s time horizon.

Lower Investment Costs
Lower mutual fund expenses are correlated with better returns, so you should work to bring your portfolio’s total costs down. Lowering costs can be particularly advantageous as you enlarge your portfolio’s stake in safer investments like bonds, where absolute investment returns, while better today than just a few years ago, are apt to be relatively low. Moreover, the differential between very strong- and very poor-performing investments can boil down to expenses.

Enjoy a Flexible Approach to Portfolio Withdrawals
Retirees seeking the same dollar amount, adjusted for inflation, year after year in retirement will generally want to be more conservative with their starting amount for portfolio withdrawals. Meanwhile, those who are willing to employ a dynamic withdrawal approach, varying withdrawals based on how their portfolios have performed, can generally take a higher starting withdrawal percentage, as illustrated in our team’s annual retirement-spending research.