Here's What Happens When You Retire With Just $100,000

It's important to fund an IRA or 401(k) throughout your career so you can retire with a nice chunk of money. But according to Northwestern Mutual, the average retirement savings plan balance across workers of all ages is $89,300. And among people in their 60s who are likely on the cusp of retirement, the average balance is $112,500.

As such, if you're heading into retirement with a nest egg worth $100,000, your savings may be roughly in line with what the average near-retiree has socked away. But that doesn't mean that a $100,000 balance will get you very far.

Why $100,000 isn't so great

A $100,000 savings balance could do a lot for you in the context of your emergency fund. But in the context of a retirement nest egg, it's unfortunately just not a lot of money.

For many years, financial experts thought that tapping retirement savings to the tune of 4% a year was a good bet. Due to increased life expectancies and other factors, many experts are now saying that a lower withdrawal rate, like 3%, may be more appropriate.

But even if we stick with 4%, for a $100,000 nest egg, that results in $4,000 of annual income a year. Meanwhile, the average Social Security benefit as of earlier this year was $1,827 a month. So if that's the benefit you're in line for and you're only able to get $4,000 a year out of your nest egg, you're looking at an annual income of about $26,000. It's hard to live comfortably on that even if your home is paid off and you're used to being frugal.

Set yourself up for a much larger nest egg

A big reason some people wind up with limited retirement nest eggs is that they don't start saving and investing early on in their careers, but rather, wait until their 40s or 50s to begin growing long-term wealth. But if you're able to start young, you may find that you're able to easily retire with far more than $100,000, even if your monthly contributions to your IRA or 401(k) plan are quite modest.

Let's say you start funding your retirement savings at age 27 and retire at age 65. Let's also assume you're only able to set aside $200 a month during that time.

The stock market has, over the past 50 years, delivered an average annual 10% return, as measured by the S&P 500's performance. So if you're able to snag that same return, you'll end up with almost $874,000. That gives you an annual income of about $35,000 from your savings alone if you follow the 4% withdrawal rule. Add in another $22,000 or so from Social Security, and you could be in pretty decent shape.

Coming into retirement with $100,000 in savings is far better than not having any savings at all. But the reality is that $100,000 just isn't a ton of money for what could easily be 20 years of retirement or more. So if you want to avoid feeling cash-strapped later in life, start funding your IRA or 401(k) as early as you can.