How to Retire Without Savings

You Can Manage It With These Strategies

Two retired women enjoy some time together.
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Saving for retirement may be smart, but it's getting harder for many people. According to a study by Northwestern Mutual, 60% of adults who plan to work past age 65 out of necessity must do so because they have not saved up enough money to stop working.

It takes some careful planning and thought, but you can retire without savings. While you likely won't be living in the lap of luxury, you may still be able to afford a decent lifestyle. The key to retiring without saving money is to use some clever skills you should start learning now.

Key Takeaways

  • If you have worked enough to get Social Security benefits, you can live on that income after you retire if you are willing to have a modest lifestyle.
  • If your company offers a pension, you may be able to rely on that when you retire, instead of your own savings, especially if you have no mortgage.
  • Many people work part-time in retirement or move somewhere with a lower cost of living so they can enjoy a more comfortable lifestyle.

Rely on Social Security Income

If your work record qualifies you for Social Security Administration (SSA) payments, you may be able to rely on that income to cover your costs when you're no longer working. Social security is a benefits program that you pay into during your earning years through SSA withholding from your paychecks.

People who work jobs that are covered by SSA long enough to earn the needed number of work credits are eligible to collect SSA benefits. You don't need a lot of credits. You only need 40 credits earned over a 10-year period to qualify.

The SSA has an online calculator you can use to figure out how much your payments will be when you retire.

The more you earn, and the older you are when you start to collect benefits, the higher your payout. One way to get a higher 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, SSA income replaces only a portion of income lost after retirement. That could range from 75% for low-income people to as low as 27% for high earners. The estimated average Social Security payout in 2021 is $1,543 per month. While that might not sound like an amount you can live on, it can be enough if you prepare ahead of time and live modestly. You can stretch your dollars even further if your income during your earning years is well above average. That would result in higher Social Security payouts and a slightly more comfortable lifestyle.

Increase your earnings, and retire later to maximize your SSA payouts.

Secure a Pension

Landing a job that offers a pension plan is like finding a needle in a haystack these days. If you work at a job that offers one, you can retire with a promised monthly income that will reduce the need to save on your own.

Pensions often apply to teachers, fire and police personnel, military personnel, and people who work for the U.S. or a state government. Some private companies, such as Coca-Cola, still offer pensions. If you pay off your mortgage when or before you retire, and you also secure retiree health care or Social Security benefits, the pension may allow you to retire without savings.

Getting a Pension Means Planning Ahead

The key to making this plan work is to stick with the same job for a long time. Most pensions are based on how many years you were at the organization and how much money you earned during the last few years you were there. The more years you worked there, and the higher your pay, the more your pension payments will be. If you change jobs every few years, you won't receive as large a pension as you would by staying with the same employer for 20 or 30 years.

Keep in mind that your SSA payments 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, nonprofit organizations, or overseas. 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 (windfall elimination provision) calculator to figure out your reduced payment.

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 during Retirement

Many people keep working in order to earn money to make ends meet after they retire. The number of U.S. workers over age 65 who are working or seeking work is growing, and 13 million people over age 65 are expected to be in the workforce by 2024.

High earners, such as doctors, lawyers, and accountants, often get used to a certain lifestyle that is hard to leave behind when they retire. One way to retain this lifestyle and retire without savings is to work a part-job in retirement that helps pay for essential expenses but still leaves you with time for other things you want to do when you retire, such as volunteer or travel. If you can manage it, consider a job that offers you the chance to work in your profession but with fewer hours.

Granted, you probably can't earn the same amount that 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.

A study found that people who are retired fit into four spending groups: typical, home, health, and discretionary.

Live on Less

Retiring without savings hinges on being able to downsize your lifestyle. Figure out where most of your money goes, such as a high cost of living in your locale, housing costs, senior care, or car costs. Then, take drastic actions to reduce those expenses or even get rid of them. You could move to a state or a country with a cheaper cost of living, move in with family, or get rid of your car, for instance.

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

While saving for your life after you retire is ideal, if you can't, you still have options. Get creative in your later years, and you can pull off quite a feat—retiring without having saved a penny.