Retiring With No Savings? Here’s What to Do

October 15, 2021

On the whole, Americans aren’t saving nearly enough for retirement. Nearly two-thirds of 40-somethings have less than $100,000 saved, and 28% of 60-somethings have less than $50,000.

Then, there’s your retirement savings. You’re one of the 15% of Americans with no retirement savings at all. And unlike Millennial and Gen Z savers, you’re soon to be retiring with no savings to your name.

Take a deep breath. Exhale. You are not financially doomed, and it may still be possible to retire. However, you’re going to have to make some big sacrifices, and you’re going to have to get real about your options.

Adjust Your Expectations

First and foremost, you need to adjust your expectations about what your retirement will look like. Here’s a hint: it’s not going to look like your grandparents’ retirement, kicking up your feet on the porch and spending your days relaxing.

First, be realistic about your goals. Let’s say you earn $80,000 per year and you’re 57, hoping to retire in 10 years, with a total of $3,500 per month in expenses. And let’s say you’re hoping to build a $400,000 nest egg by 67 by saving half your income. There are major flaws here. First, it’s unrealistic to save half your income, since you have to afford expenses and taxes. Even if you did sock away half your income, the only way you could reach $400,000 is if you earned a 10% annual rate of return, which is far more aggressive than most people ever see. It also does not account for loss years.

While the average stock market return has held steady at 10% for the last century, keep in mind that this is a full-market average, not your personal return. It’s also the average, which does not mean you’ll earn 10% every year—10% is simply the average of the boom and bust years of the past century. A more realistic rate of return is 5%. Assuming you saved half your income, that would get you $334,000, but again, that doesn’t account for expenses or taxes.

Second, keep in mind that your initial hopes for when you retire may not be realistic. If you don’t have savings, you may not be financially fit to retire—or at least, not as early as you hoped. If you’re 50 years old with no retirement savings hoping to retire at 67, you may need to add another ten to thirteen years to your intended retirement age. Remember, the longer you work, the more time you have to build a financial cushion. When you retire may not be fully within your control, but if it is, plan to work as long as you’re able.

Make Your Savings Do the Work

To be clear, all hope is not lost. But you have to be extremely disciplined to afford retirement. That means making sacrifices and making your savings do the work that your investments would have done in previous decades.

First, this means significantly downsizing your life. This will be painful at first, but here’s the good news: if you’ve already made the transition, it will be much easier to maintain in retirement. You’re going to have to make this transition as soon as possible, even if you don’t want to cut costs that much in retirement.

For those who want to make up as much lost time as possible, that means cutting out any non-critical expenses. Critical expenses include:

  • Housing
  • Utilities
  • Healthcare and insurance
  • Food
  • Transportation
  • Debt

Anything else is extra. It’s not going to be fun, but it will help.

Also, keep in mind that you can and should significantly downsize your critical expenses. For example, switch over to a cheaper car or use public transportation (don’t be shy about crunching the numbers to find the cheaper option, and remember that every red cent counts). Get in touch with your Internet provider to figure out how to cut your bill. Opt for generic brands and always use a senior discount. Switch to Medicare as soon as you’re eligible to reduce out-of-pocket costs. Use the cheapest cell phone plan you can find. Get aggressive about consolidating your debt.

Plan Ahead for Social Security and Retirement Accounts

If you think you’re going to maintain your standard of living by coasting on Social Security, think again.

The average estimated Social Security benefit is $1,543 per month as of January 2021. The key word is average—the Social Security Administration calculates your benefit based on your unique case, but keep in mind that Social Security has worn thinner and thinner over the decades.

Either way, Social Security does not adjust to account for inflation, nor does your benefit go up if you suddenly have significant medical expenses. It’s a safety net, not a lifeline, and you can’t count on it like one.

Also, your work record is what qualifies you for Social Security benefits. In other words, people who work jobs covered by SSA are the ones who receive benefits. Granted, 89% of US workers are covered by Social Security, but some are not. These include certain state and local government employees, railroad workers, federal employees hired before 1984, and foreign nationals who work in the U.S. for their home government or an international agency.

For most employees, the important part is this: the more you earn and the older you are when you collect benefits, the higher your benefit will be. However, Social Security only replaces a portion of your income, not all of it, which is where retirement accounts come in.

Work as Long as Possible—and Plan a Side-Hustle or Part-Time Gig

In case you hadn’t caught on yet, your retirement may not look like chilling out and playing golf. That doesn’t mean you can’t relax, but you will need to make up the difference in your income if you don’t have retirement investments to pick up the slack from Social Security.

In most cases, this means two things: working as long as you’re able and maintaining a side-hustle or part-time gig once you retire.

Your side hustle could be just about anything. Fortunately, there’s a thriving gig economy that you can take advantage of and plenty of part-time jobs that need people to cover hours. Either way, you need to crunch the numbers to make sure your retirement job earns what you need (be realistic in your calculations!)

We know that investing is a challenge. Life throws you a lot of curveballs. But we also know that it’s never too late to change your financial future—even if you’re staring down the prospect of retiring with no savings.

Masterworks is a fintech company democratizing the art market. Our investors are able to fractionally invest in $1mn+ works of art by some of the world's most famous and sought-after artists.