Saving for retirement is not easy. After all, how are you supposed to carve out money for retirement savings when you have pressing bills, like a car and mortgage payment, to make?
But if you don't manage to bring any savings into retirement, you may need to live on Social Security alone. And that could easily result in a cash-strapped existence.
You'll likely need more income than what your benefits provide
It's a big myth that Social Security will fully replace the paycheck you were collecting before retirement. If you're an average earner, Social Security will only replace about 40% of your former income. So if you retire without any savings, you might end up effectively taking a 60% pay cut.
At the start of 2023, the average Social Security benefit was $1,827 a month. That's an annual income of a little less than $22,000.
Now, think about your expected bills in retirement. Even if you own your home in full and you're able to shed other expenses related to holding down a job, you'll still need to maintain your home, pay for utilities, fuel up your car, and eat. And a monthly income of $1,827 may not cover your basic expenses in full.
Of course, your monthly Social Security benefit might be higher than $1,827. The point, however, is that if you retire without savings, you might struggle a lot. And you might land in a situation where you're forced to cut back on pretty much every single luxury because you can't afford any extras.
Don't put yourself in a tough spot
Retiring without savings could make you miserable at a time in your life when you deserve to enjoy yourself. So rather than run that risk, prioritize your retirement savings, even if you have to start slowly.
One smart bet is to automate the process of saving for retirement so you know your nest egg is getting funded every month. If you have a 401(k) plan through work, you can sign up to have contributions deducted from your paychecks automatically. Otherwise, you can find an IRA with an automatic savings option and do something similar -- arrange for a portion of each paycheck to land in that account off the bat.
And remember, too, that you don't need to part with tons of money to build up a nice amount of savings over time. Let's say you're 25 and want to end your career at 65. Over the past 50 years, the stock market has delivered an average annual return of 10%, as measured by the S&P 500. So if you go heavy on stocks in your retirement account, you might enjoy a similar return.
In that case, if you sock away $100 a month over 40 years, you'll contribute a total of $48,000 and will end up with about $531,000. That could easily spell the difference between living comfortably and struggling.
Retiring with no savings could make your senior years downright miserable. Do what you can to avoid that fate, because your older self deserves better.
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FAQs
You may have to rely on Social Security
What if I don't have enough money to save for retirement? ›
If you need assistance or have questions about how to save for retirement, or how much, consider seeking professional advice. Brokerage companies like Fidelity and others offer one-on-one retirement planning, advice and overall coaching to help you reach your financial goals.
What to do if you're 60 with no retirement savings? ›
Consider Part-Time Work
Income from part-time work coupled with your Social Security benefit could be all you need to live comfortably. It will certainly make your savings go further. More retirees are opting for this type of arrangement than have in previous generations.
Where to retire with no money? ›
The top 5 U.S. cities to retire if you don't have any savings—only 1 is in Florida
- Foley, Alabama. Percentage of population 65 and older: 31% ...
- Mountain Home, Arkansas. Percentage of population 65 and older: 28% ...
- Hot Springs Village, Arkansas. Percentage of population 65 and older: 63% ...
- The Villages, Florida.
If you run out of money in retirement, you may face financial hardship and reduced quality of life. You may need to rely on family members or government programs for financial assistance, reduce your standard of living, or make significant lifestyle changes.
What percent of people don t save for retirement? ›
That's not much to fall back on in retirement. As many as 28% of Americans have nothing saved for their retirement, 39% aren't contributing to a retirement fund and another 30% don't think they'll ever be able to retire. That's according to a new GoBankingRates survey.
Why do most people not save for retirement? ›
Social Inequality in Later Life (Russell Sage, 2019). Most working-class people don't have a pension now, Carr says, “and if they do have a pension, they can't afford to put anything in it. And so that's part of the reason why they just amass less over time.
What happens when you get old and have no money? ›
Aging adults without money to support them through the rest of their lives can stay in a nursing home for up to 100 days—and Medicaid will cover the cost for this brief period. Seniors who reside in an assisted living facility and run out of funds will be evicted.
How many Americans have no savings? ›
As of May 2023, more than 1 in 5 Americans have no emergency savings.
Is 60 too late to start saving for retirement? ›
It is never too late to start saving money you will use in retirement. However, the older you get, the more constraints, like wanting to retire, or required minimum distributions (RMDs), will limit your options. The good news is, many people have much more time than they think.
Many retirees fall far short of that amount, but their savings may be supplemented with other forms of income. According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
Where can I retire on $800 a month? ›
Banyuwangi, Indonesia. Insider Monkey Score: 14 Banyuwangi, Indonesia, emerges as one of the best places to retire with no savings, blending low living costs with mesmerizing natural beauty. With living expenses between $700 to $1,000 a month, it appeals to those seeking an economical retirement lifestyle.
Can you live off $3,000 a month? ›
Top the amount with 401(k) savings, living on $3,000 a month after taxes is possible for a retiree. For those who only have social security benefits to rely on, there are many places where they can retire on their checks both in the USA and around the world.
Can you retire if you are debt free? ›
There's no doubt that not having any debt can give you a certain sense of freedom. When you don't owe anything to anybody, the money you have is yours to do with as you wish—a great retirement dream scenario.
Do most retirees have debt? ›
According to the Survey of Consumer Finances, the number of households headed by adults ages 65 or older with any debt rose from 41.5% in 1992 to 60% in 2016. The median total debt for older adult households with debt was $31,300 in 2016.
Can a bank take your retirement money? ›
Money saved in a qualified retirement account, such as a 401(k) plan, is typically protected from private creditors as long as the money remains within the account. The IRS, however, may come after retirement funds to pay back taxes or other federal obligations.
What if I haven't saved for retirement at 50? ›
If you didn't make saving for retirement a priority early in life, it's not too late to catch up. At age 50, you can start making extra contributions to your tax-sheltered retirement accounts (called catch-up contributions). Younger workers can only contribute $23,000 to their 401(k)s and $7,000 to their IRAs in 2024.
How much does the average person need to have saved for retirement? ›
Key takeaways. Fidelity's guideline: Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. Factors that will impact your personal savings goal include the age you plan to retire and the lifestyle you hope to have in retirement. If you're behind, don't fret.
Do most people have enough saved for retirement? ›
A Grim Outlook For the Generation X
For Gen Xers (those born between 1965 and 1980), the bottom half of earners have only a few thousand dollars saved for retirement. While the typical Gen X household has an average savings of more than $243,000, the median household has only $40,000 in retirement savings.
How do I ensure I have enough money for retirement? ›
One well-known method is the 80% rule. This rule of thumb suggests that you'll have to ensure you have 80% of your pre-retirement income per year in retirement. This percentage is based on the fact that some major expenses drop after you retire, like commuting and retirement-plan contributions.
