Tips for Retiring with Little to No Money Saved
One of the biggest questions associated with retirement planning is, “How much do I need to save?” A recent retirement study of American workers conducted by Schroders found that the average worker age 45 or older believes it will take $1.1 million to retire comfortably. However, only 21% of those workers expect to save $1 million or more for retirement.
Can You Retire on No Money?
Having no savings means that you will be forced to rely on your Social Security benefits for income in retirement. According to the Social Security Administration (SSA), among Social Security beneficiaries, 12% of men and 15% of women rely on Social Security for 90% or more of their income. So, it is possible to retire with no money saved, but it requires sacrifices, hustling, and careful planning.
Key Takeaways:
Retiring with little to no money saved is not impossible, but it can present some challenges to your financial plan. Depending on where you’re starting from, you may need to delay Social Security benefits, work longer, or drastically reduce expenses to retire with no money saved. Talking to a financial advisor can help you create a realistic plan for retiring with no savings. Investing money vs. saving it can help you build wealth, so that you don’t go into retirement empty-handed.
Understand Your Social Security Benefits
Social Security benefits provide a stream of income for retirement, so if you’re trying to retire with no money saved, it’s important to understand how much you might be able to collect. As of August 2024, the average monthly retirement benefit from Social Security for retired workers was $1,920.48.
Whether you receive that amount, or more, or less, can depend on a number of factors, including your employment and earnings history and the age at which you retire. The earliest you can begin taking Social Security retirement benefits is age 62, but claiming benefits early reduces the amount you’re entitled to receive. Delaying benefits until age 70, on the other hand, can allow you to claim an increased benefit amount.
If you’re retiring with no savings, it may be to your advantage to wait as long as possible to take Social Security benefits. Calculating your estimated retirement benefit at different ages can help you determine when the timing may be right to apply for Social Security.
According to the SSA, Social Security benefits typically account for a replacement rate of roughly 40% of a retiree’s previous working income, but it is commonly accepted that a replacement rate of roughly 80% is adequate for retirement income from all sources. So how do you make up that 40%?
Stick to a Budget
Making a retirement budget is essential if you have little to no money saved. Having a budget can help you track where your money is going and avoid overspending.
When making a budget for retirement, it’s good to consider where you can slash spending if you anticipate having limited income. You can start with the largest expenses first, which are usually housing and healthcare, then work your way down the list to look for areas where you may be able to cut back.
For instance, if housing costs take up a sizable part of your income, you might be able to reduce those expenses by downsizing to a smaller home, renting out part of your home, selling your home and moving in with a relative, or moving to an all-inclusive retirement community.
The more cuts you can make, the better off you’ll be when retiring with nothing in the bank.
Apply for Government Benefits
Government programs can help to offset some of your cost of living in retirement if you have little or no money saved. There are several government programs for which you may be able to qualify if you have limited financial resources, including Social Security Income (SSI) and Medicare.
Eligibility requirements for each program vary but can be based on age, disability status, income, and assets. If you’re unsure of the kind of government benefits for which you might qualify, you can contact your local Department of Social Services for assistance.
Get a Part-Time Job or Side Hustle
If you’re contemplating retirement with no savings, then you may need to find ways to make more money. Getting a part-time job or starting a side hustle are two ways to earn money in your spare time without being locked into a full-time position.
Examples of possible side hustles that you might start in retirement include walking dogs, babysitting, selling homemade goods, or getting paid to run errands.
Remember that if you’re earning money from side hustles, the IRS still expects you to report that income on your taxes. If you have more than $400 in earnings from side hustles or self-employment for the year, you’ll have to report it as taxable income.
Ways to Avoid Retiring with No Money
If you fear that you will have to retire without any savings but haven’t yet actually gotten there, there are things you can try to prevent that scenario. They may include paying off debt, increasing your income, utilizing your workplace retirement plan, and investing your money for retirement.
The Bottom Line
Retiring with no money may not be ideal, especially if you’re envisioning a particular lifestyle in retirement. If you have little to no money saved and your retirement is approaching, it’s crucial to start planning sooner rather than later. Finding a financial planner or advisor to work with you can make coming up with a realistic plan for retiring with scant savings easier.
