How to Retire Without Savings

It won't be easy, but you can manage it with these strategies

Hands of an elderly man holding his pension booklet open to details of his payment
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Graeme Robertson / Staff / Getty Images

Saving for retirement may be smart, but it's becoming increasingly difficult for a large swath of the population. A GoBankingRates survey from 2019 found that 46% of Americans had no money saved for retirement; another 19% had a paltry nest egg of less than $10,000, bringing the total percentage of savings-deficient retirees to 64%.

Fortunately, if worst comes to worst, you can retire without savings. While it's unlikely that you will be living in the lap of luxury, you may still be able to eke out a decent lifestyle. The key to retiring without first saving is to use a few different techniques, either alone or in combination.

Rely on Social Security Income

If your work record qualifies you for Social Security benefits, you may be able to rely on your Social Security income to cover your expenses in retirement. Social Security is a retirement benefits program that you pay into during your earning years through Social Security tax and withdraw from during retirement.

People who work jobs covered by Social Security long enough to earn the required number of work credits (usually 40 credits earned over a 10-year period) are eligible to collect Social Security benefits, which are based on your highest-earning years over a 35-year period and the age at which you start to collect benefits. In general, the more you earn, and the older you are when you start to collect benefits, the higher your payout. So, one way to maximize your payout is to work until or past your full retirement age, which is 67 if you were born in or after 1960.

For most workers, Social Security income replaces only a percentage of income lost after retirement, ranging anywhere from 75% for low-income individuals to as low as 27% for high earners. The average Social Security payout was about $1,337 per month or $16,044 per year, according to Social Security Administration (SSA) data from December 2019.

While that may not sound like much, it can be done if you are prepared to live lean. This plan can work great for the free-spirited type, or for anyone who, for whatever reason, didn’t save along the way. You can stretch your dollars even further if your income during your earning years is well above average, as this would result in higher Social Security payouts and a slightly more comfortable lifestyle.

Increase your earnings and retire later to maximize your Social Security payouts.

Secure a Pension

While landing a job that offers a pension plan is akin to finding a needle in a haystack these days, if you work at an organization that offers one, you can retire with a guaranteed monthly income that does away with the need to save on your own for retirement.

Pensions often apply to teachers, fire and police workers, military personnel, and people who work for the federal or state government. However, some private companies, such as Coca Cola, still offer pensions. If you pay off your mortgage at or before retirement, and also secure retiree health benefits or Social Security benefits, the pension may allow you to lead a comfortable retirement.

The key to making this plan work is to stick with the same employer for a long time. Most pensions give you a benefit based on how many years you were at the organization and on your final few years of compensation. The more years, and the higher the compensation, the higher the benefit. If you hop around too much from company to company, it is unlikely that you would receive as large a pension as you would by staying with the same employer for 20 or 30 years.

Keep in mind that under a Social Security rule known as the Windfall Elimination Provision, your Social Security benefit may be reduced if you also receive a pension from years of work where your earnings were not covered under the Social Security system. The provision generally only impacts people who work for the government, non-profit organizations, or overseas. Moreover, it can reduce your Social Security benefit by an amount of no more than half of your pension. You can use the SSA's Online WEP Calculator to estimate your actual benefit reduction under the provision.

If you collect Social Security and a pension, you might have to take a reduced Social Security benefit because of the Windfall Elimination Provision.

Work in Retirement

While it may seem like an oxymoron, many Americans continue to hold down a job in retirement. A study by United Income found that 20% of Americans over the age of 65 were working or seeking work as of February 2019 and that 13 million people in this age bracket will be in the workforce by 2024.

Professionals, particularly high earners, such as doctors, lawyers, and accountants, often get accustomed to a certain lifestyle that they find difficult to leave behind in retirement. One way to retain a semblance of this lifestyle and sustain retirement without savings is to work a part-job in retirement that helps pay for essential expenses but still leaves you with time for other pursuits you had in mind for retirement, such as volunteering. If you can manage it, get a job that offers benefits, such as paid leave, which may allow you to splurge on activities such as travel on occasion.

Granted, you probably can't earn the same amount you did in your younger years and revert to your old lifestyle unless you work full time. But bringing in some form of income can allay fears of going broke in retirement in the absence of other savings.

Live on Less

All of the above approaches hinge on an overarching strategy of downsizing your lifestyle. Evaluate your largest expenses, such as a high cost of living in your locale, housing, senior care, or automobile expenses, and take dramatic actions to reduce or eliminate them. You could move to a more affordable state (or country), move in with family, or go car-free, for example.

After adopting a new lifestyle mantra, look for opportunities to stretch your money. Try to trade skills, such as cooking or pet-sitting, in exchange for rent or utilities. Buy only what you need for less by shopping at thrift stores or finding other ways to buy things second-hand.

While saving for retirement is ideal, if you can't, you still have options. Get creative in your later years, and you can pull off quite an achievement—retiring without saving a penny.