What do you do if you have no retirement savings?
Most studies on retirement planning come to similar conclusions.
One oft-quoted Fidelity study determined that to retire by 67, you should have your annual income x 10 saved. That’s an easy benchmark to look at; if you earn $60,000, you need to have $600,000 saved.
Of course, there are far more experts who recommend you save more than twice that amount.
When it comes to what individuals say, 58% of retirement savers (including retirees) stated that outliving their retirement savings was their greatest retirement fear.
So, what do you do when you’re already sure you’ll have problems meeting even that 10x your income threshold?
What if you’re also already approaching age 50?
The consensus among experts on the matter is that you should certainly do something if this describes you.
Is it too late to save for retirement at 50?
This is a hard question to answer, and there are very few relevant statistics to help. However, it’s safe to say that having comfortable retirement savings is extremely difficult if you start at 50.
Knowing that, there are a few things you should do to have the best chance possible at the most comfort possible in your retirement.
1. Understand Time is Against You.
The consensus among experts on the matter is that you should certainly do something if this describes you.
So, the first thing you should do is understand that time is against you. Staying positive is always important, but there is no use sugar-coating the mathematics of the challenge you face.
2. Save More Aggressively.
Age 50 comes with another change in paradigm; the IRS increases the amount you can contribute to retirement plans.
This is also the age bracket that corresponds with the highest income for most people. So, if there’s a time to hunker down and start saving aggressively, this is the window of opportunity.
A 401(k) can only receive $23,000 in contributions (2024 limit). However, once you hit 50, you can make “catch-up” contributions of up to $7,500 more.
If you’re behind on or have no retirement savings, now is the time to start taking advantage of this extra contribution space.
IRAs have a similar mechanism. You can contribute $7,000 normally. But those aged 50 and up can contribute an additional $1,000 for a total of $8,000 per year.
It may not seem like much extra, but for the 17 years between 50 and 67, maxing out your retirement account contributions into retirement investments can make a huge difference in your retirement savings.
Retirement Planning: The Top 5 Things You Should Know About
3. Protect Your Income.
Some part of what we’ve gone over already depends on you maintaining your earnings.
The age bracket of 45 to 54 is the one where people typically earn the most by far. It’s best if you can at least maintain your earnings during this period.
So, it’s important to be especially careful about keeping your income steady. This means a few things in practice:
- Avoiding risky hobbies/activities for some time
- Ensuring your medical and disability insurance covers lost income from unexpected events
- Reviewing elimination periods, the periods before your disability benefits would kick in
- Checking your emergency savings balance
- Maintaining a healthy diet and lifestyle for this period, if you aren’t doing so already
4. Earn More.
Technology has provided several new ways to earn more money when you’re not working your day job. This can mean either:
- Providing new income streams through part-time/freelance work
- Making investing easier and more accessible
If you’re 50, it’s normally the best time to consider these options. Think of all the ways you could monetize your professional or other life experiences. While these options used to be thought of as a Millennial’s game, people in the middle of their careers are better placed to take advantage of them.
For example, within your career or the hobbies you’re most passionate about, consider:
- Writing a book or guide
- Starting a course
- Teaching
- Tutoring/counseling
These options are great because they aren’t capital-intensive. You don’t need much money to start with any of them.
5. Split Your Rent/Mortgage With Others.
If you have extra space, why not sublet or rent it out?
There are many ways you can go about sharing your space for increased income. Simple rentals can be more trouble than they’re worth, but seasonal vacation rental, for example, can be a simpler option.
This is another area where leveraging technology can be very helpful. Platforms like Airbnb make short-term rentals easy.
What do you do if you have no retirement savings?
If your situation is truly dire, austerity measures may be worth considering. This means taking measures such as:
- Moving to a less expensive home
- Forgoing luxuries and choosing the cheapest options for most things
- Choosing a fuel-efficient and robust car
The answer here is not much different than the answers we’ve gone over above. The more pressing your financial situation is, the more aggressively you should be working on retirement savings.
When increasing your income isn’t possible, it’s time to cut costs further.
How do I retire with no money?
Lastly, we need to address the most dire situation. If you’re significantly closer to retirement than a 50-year old and are looking at having no retirement savings, there are extra considerations.
First of all, your will likely end up relying on social security. Second, you will likely need to continue working, at least part-time.
Social security is available to individuals who:
- Have worked in jobs covered by social security
- Have a medical condition that qualifies for social security
Social security benefits are paid monthly to the disabled and retired. If you’re entering full retirement age, the two are wrapped up into one payment.
Knowing how you can use social security requires an understanding of work credits. If you’ve worked for most of your adult life, you should qualify for some social security income.
No Retirement Savings? Conclusions
If you have little to no retirement savings at 50, there is no escaping the fact that you’re in a race against time.
However, by keeping calm and using all the advantages you have at your disposal, you may be able to put together something of a nest egg.
Your late 40s through 60 are years where you:
- Should normally have the highest income of your lifetime
- Can always contribute more to retirement accounts
It’s even more worth it to leverage technology and work hard to achieve the best retirement possible.
