What Retirement Without Savings Looks Like

06/24/2015 12:44 pm ET | Updated Jun 24, 2016


By Paul Sisolak, Contributor

In a perfect world, the perfect retirement is where life begins. But for people like Debra Leigh Scott, there's the very bleak possibility that retirement is where life might end.

"Suicide is my retirement plan," Scott, a 60-year-old adjunct professor, said in an interview with Vitae. "Unless you have a spouse or partner, you're looking at dire poverty in old age. In addition to poverty, you're looking at getting no additional work because of your age, or you're looking at dropping dead in the classroom."

Scott, a divorced mother of two grown children, has been teaching for over a quarter century but never received the tenured position she hoped for. After years of financial struggles -- including the loss of a home -- she has no money saved for retirement.

Fewer Americans than ever before are adequately prepared financially to retire. In a survey earlier this year by the Employee Benefit Research Institute and Greenwald and Associates, 28 percent said they have less than $1,000 in savings and investments poised for retirement. A 2014 Federal Reserve survey paints a more discouraging picture: 31 percent of non-retired respondents have zero retirement savings -- 19 percent of them ages 55 to 64.

Scott's story is a real-life reminder that paints a painful portrait most people would rather avoid. With their golden years well ahead of them, many people assume there will be enough money stored up to retire without a hitch. And they don't even want to think about considering the alternative. But for many adults behind on retirement savings, they might be unaware of the realities of retiring without enough money in the bank.

Is Retiring With No Savings an Option?

Opinions vary on how much money people need in retirement to sustain their current lifestyle, but 70 percent to 80 percent of pre-retirement income is often recommended. If your household is at the national median of $54,000 per year, for example, you'll need to save up enough during your working years to have $37,100 to $42,400 annually at your disposal during retirement.

"That might be enough if you've paid off your mortgage and are in excellent health when you kiss the office goodbye," CNNMoney wrote. "But if you plan to build your dream house, trot around the globe, or get that Ph.D. in philosophy you've always wanted, you may need 100 percent of your annual income -- or more."

If that money isn't there by the time you retire, that ideal retirement -- world travel, time spent with family, and a life of leisure, relaxation and hobbies -- will have to come with some major downgrades to compensate for your lack of savings.

1. You'll need to live off your Social Security benefits.

The average Social Security check for retirees is $1,287. "Social Security can help boomers make ends meet during their golden years, but for many, it won't be enough," wrote Donna Fuscaldo of Fox Business. If you're single and qualify for Supplemental Security Income, you might be able to barely live off Social Security and SSI, but if you have any extenuating expenses, like a mortgage or supporting adult children returning to the nest, you cannot.

2. You might have to get a roommate.

Steve Vernon of CBS MoneyWatch offered the example of a single, 65-year-old woman with a $50,000 annual salary -- and no savings or assets to invest -- looking to retire. "To help cover her living expenses, one option she may want to consider is the 'Golden Girls' solution of sharing living quarters with other people in her situation," he wrote. "If she owns her house, she may want to consider renting a room to bring in more income."

If personal space and quiet are important to you, new retirees with no savings might not have the patience or inclination to go the roommate route -- though Vernon noted that this arrangement could reduce feelings of loneliness common in elderly people. Rooming with adult children can be a more comfortable alternative and can bring family closer together.

3. You'll have to alter your lifestyle and spending.

If Vernon's hypothetical retiree wants to retire full time at age 70, "she'll need to focus on buying 'just enough' to meet her needs and be happy. Most likely this will be a struggle, unless she has paid off the mortgage on her house, which will make things a little easier," he wrote.

4. You might have to continue working.

You could delay retirement until 70, which is completely realistic for a healthy senior. "Others, who can't live off of Social Security alone, will need to find ways to supplement their incomes with part-time work," according to Mike Dang of The Billfold. A good idea in theory, but will you earn enough money in those few years to actually retire on?

"Eventually she'll need to reduce her living expenses, though, because chances are good she won't be able to work much past 80," Vernon wrote. "Many people might groan at the idea of working into their 70s, but our hypothetical retiree really doesn't have much of a choice unless she's able to dramatically reduce her standard of living."

5. You'll need to consider downsizing.

Selling your big house or car and downgrading to smaller, more affordable living arrangements and transportation can save money. If every decade of your working life has been to dream bigger and bigger, however, scaling down smaller and smaller in retirement might seem a bit anticlimactic.

6. You could end up homeless.

In all honesty, ending up homeless is not far from reality for people with zero savings or assets to their name. But in some corners of the world, it's a way of life for a number of baby boomers. A 2014 Harper's article brought this sad fact to light as "a growing trend of older Americans for whom the reality of unaffordable housing and scarcity of work has driven them from their homes and onto the road in search of seasonal and temporary employment across the country," Lynn Stuart Parramore wrote of AlterNet. These displaced seniors have no choice but to keep working as RV-roaming nomads in whatever farm, factory or amusement park that will have the "workampers."

Start Saving for Retirement Now

It's never too late to begin a retirement savings plan, no matter what stage of life you're in. Here are retirement savings tips for different age groups:

  • In your 20s: You've got 40-plus years to build a nest egg, but don't procrastinate. A recent LearnVest study found that a saver who begins putting away $600 a year in a retirement fund at age 25 will have $72,000 by age 65.
  • In your 30s: With your career hopefully in full swing, this is the decade to take advantage of investments and high interest rates to strengthen your retirement nest egg. This is the period when you should be considering savings vehicles like index funds and contributing heavily to your IRA or 401(k). Start building a financial relationship with a broker to guide you down your savings path.
  • In your 40s and 50s: With the retirement savings ball rolling, middle age is the time to keep honing and managing your finances to save up some extra cash. Stay on top of your budget, build an emergency fund, take steps to minimize spending and lower high-interest debt, and find extra income through insurance. By this point, you should be homing in on the dollar figure you'll need if you intend to retire between 65 to 70.

Trying to retire without any savings in the bank can be difficult, and that difficulty is compounded by other factors senior citizens need to keep in mind as they age, like health issues and mobility. If saving money is not possible for you, retirement doesn't have to pass you by. There are plenty of government-assisted and nonprofit programs that can help you, such as the Commodity Supplemental Food Program, Medicare, senior housing help from Housing and Urban Development and other resources.

This article originally appeared on What Retirement Without Savings Looks Like