How to Retire When You Have Nothing to Save

There is a lot of magical thinking around retirement. The rule of thumb is to put about 80% of your current income into retirement, and while this number is a bit sketchy , it’s useful in highlighting how expensive retirement can be. When you are young, you think that retirement is so far away that you have nothing to worry about just yet . And as you get older, there are often many ways to fool yourself that you’ll be fine, even if you’re not actually saving a lot of money. Some people think that they will sell an asset such as a house or business and live off the proceeds. Others rely on Social Security or assume that downsizing and moving to a cheaper area will solve all their problems.

And it might all work, but if you’re approaching retirement age and missed the part about saving a huge amount of money, the simple fact is that you’ll have to consider living on a relatively small income in your lifetime. golden years. And you are not alone – the average American saves only $65,000 for retirement , and if you only look at people who have reached retirement age, that figure is only $255,200. That’s… not much money to live on, perhaps for decades. The average Social Security payment is only $1,656.30 a month —less than $20,000 a year.

Even if you can make your numbers work with housing, food, and other essentials, the real killer of retirement age will be healthcare. Medicare helps, but even with it, your average out-of-pocket expenses will be about $6,500 a year , which is almost a third of the average Social Security benefit. So, if you’re looking at retirement and haven’t saved up a lot of money, are you out of luck at all? Not necessarily, but now is the time to take a few steps.

Step One: Start Saving

First of all, just because you are close to retirement age and have no savings does not mean that you should reach retirement age without savings. You still have an airstrip, so use it. Create a budget and stick to it (it’s recommended to create an account at www.ssa.gov to find out what your estimated Social Security benefits might be), pay off any accumulated debt, and then set up a savings plan. . Hiring a financial advisor is always a good idea, but the basic strategy is pretty simple: once you get out of debt and cut down on your current expenses, maximize your retirement account contributions, take full advantage of any employer matches, and if you are the ones who 50 are trying to make catch-up contributions (currently up to $7,500 a year for 401(k), 403(b) and other retirement accounts).

If you don’t have a retirement account, now is the time to open one – you can fund an Individual Retirement Account (IRA) with any amount of money, and you can find companies that offer IRAs with no minimum balance requirements. Even five years of disciplined savings in a retirement account can produce surprisingly reliable results, and if you’re starting from scratch, any amount of deferred tax savings will help.

Step Two: Delay

Once your financial house is somewhat close to order, it’s time to face the truth: you may need to put off retirement if you can. While you can retire at age 62 and receive Social Security benefits, there is a huge difference in the amount of money you get if you put it off until age 67 or, best of all, until age 70. For additional years, you can continue to fund your retirement accounts, creating a budget for when you finally hang up and retire. If you are able to work and have a job, postponing retirement until you can bear it can be extremely beneficial.

Step three: cut

Whether or not you can save a lot in the final sprint, the key to a profitable retirement is a major lifestyle adjustment:

• Life situation. If you have a home and are in a mortgage, consider selling it. Freeing up the capital you’ve built up can be another way to increase your retirement savings (and therefore your income), and if the total value of your home (mortgage, insurance, taxes, maintenance) is quite high, downsizing to a smaller home in a cheaper one . area can make a huge difference. In addition, moving to an area with good public transport can allow you to live without the cost of a vehicle . If you are renting, you may also need to move to a cheaper area and pay less rent. And while the last time you had a roommate was decades ago, you may need to consider a roommate situation in order to share housing costs. You can use a service like Senior Homeshares to find someone suitable, or bite the bullet and move in with relatives. Finally, you can look into subsidized housing for the elderly , which can significantly reduce the cost of rent – up to 70%. Availability of these units varies greatly by region, and there is often a long wait after applying. If the subsidized housing situation can help, do your research now and apply as soon as possible.
• Capital. On the other hand, if you’ve paid off your mortgage and own your home, consider a reverse mortgage or home equity investment . Any of these tools can allow you to stay in your home while still accessing the capital you have accumulated in the property.
• Working. Even if you officially retire, you might consider keeping your job. At full retirement age ( which varies , but for most people these days it’s 67), you can earn up to $56,520 without affecting your Social Security income. If you rely on Social Security for most of your income, anything you can earn on top of that will obviously help.
• Prioritize spending. Retirement with little or no savings almost certainly means you’ll have a very careful budget. This means that your needs are more important than your desires – you need housing, utilities, food, healthcare, and a minimal wardrobe. Everything else should depend on how much money is left each month.
• Look for free stuff. Take advantage of the local library for your entertainment needs – there are plenty of books and other materials you can borrow – as well as a long list of other perks like free admission to events and attractions. There are many free streaming services that offer many TV shows and movies, and a cheap digital antenna can complement this with free TV.
• Discounts for pensioners. Don’t let pride fool you – if you’re of retirement age and have little savings, every penny counts. There are many discounts for seniors, but you often have to look for them . The starting point is to join the American Association of Retirees (AARP), which offersan introductory membership for as little as $12 . AARP uses its membership to get a lot of discounts and offers, so this fee will go a long way.

Retirement can be terrible if you haven’t saved up a ton of money to pay for it, but that doesn’t have to be the case. Adjusting your expectations and your lifestyle may be all it takes for a relatively happy retirement. The key is to start planning today.