Some Americans think they need $1.4M to retire — but don’t worry if you’re not even close. Here are 5 areas where retirement spending are much lower than you expect

1. Saving for the future

When planning for their retirement income needs, many people forget that they’ll be able to significantly cut back their savings after they've stopped working.

Throughout your career, you’ll ideally save around 15% to 20% of your income, with a good chunk of this going toward retirement savings. Once you’ve already retired, though, you no longer need to save for your later years since you’re living them.

You should still make certain you have an emergency fund and save for big purchases such as home repairs or a new car. Still, chances are good that you can drop your savings rate dramatically.

If you were saving 20% of income and you can scale down to saving only 5%, that lifestyle change accounts for 15% of pre-retirement funds that don't have to be replaced.

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2. Taxes

When you were working, you had to pay income tax on all your earnings and FICA tax (taxes for Social Security and Medicare).

After you retire, you’ll no longer owe FICA taxes, which total 15.3% for self-employed individuals and 6.2% for employed workers whose companies cover half of what they owe (plus an extra 0.9% Medicare tax for high earners).

Depending on where you live, many states also don’t tax pension income or distributions from retirement accounts, although you’ll typically still owe federal taxes on those funds.

You’ll also owe taxes on Social Security benefits only if countable income exceeds $25,000 for single filers and $32,000 for married joint filers. Countable income is half of Social Security benefits plus all taxable and some non-taxable income.

When you cut your tax bill dramatically, that’s less income you need to replace compared to what you were earning before leaving work.

3. Housing costs

Just 44% of Americans ages 60 to 70 retire with a mortgage. Many seniors who own their homes have managed to pay off their loans during their working lives. For those who have, eliminating this cost can be a major boon to their budget.

Of course, seniors will still have housing expenses including utilities and property taxes. In some locations, however, retirees may be able to qualify for special rebates or tax breaks to help bring these costs down.

The general rule of thumb is to keep housing costs to around 25% to 30% of income. If your expenses are within this range and you’re able to eliminate your mortgage and lower property taxes, it’ll result in pretty significant savings.

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4.Commuting

Americans spend an average of $2,043 on commuting costs each year, but these costs can be far higher in some parts of the country. In San Francisco, for example, average commuting costs come in at $12,650, which is the highest in the U.S.

Once you no longer need to travel to work every day, you can save a fortune on commuting expenses. Some retiree households may be able to downgrade from two cars to one, and everyone who is retired and driving less should alert their insurer — or switch to a new plan — as this can result in a premium cut.

When your car is driven less, you’ll also spend less on gas and maintenance, and may not need to replace the vehicle as often. If you can pay off your car loan and just keep your older vehicle, this will also result in significant savings.

5. Dining out

Finally, retirees can reduce dining out expenses. You won’t have to buy lunch at work anymore and you may have more time to cook at home so you’ll spend less on restaurants in general. If you do go out, you can also take advantage of senior discounts and happy hours that slash the price further.

Since you can save money in all five of these areas, you may not need as much money as you think — and you might be just fine retiring with a lot less than $1.4 million.

Of course, it’s always a good idea to aim high when setting retirement savings goals, but if you’re discouraged about the prospect of ever retiring, realizing that some expenses may be lower than you’re anticipating could provide reason to hope that you’ll have the money to quit working one day after all.