How to retire without savings

We’re going to discuss three major financial strategies: reducing spending, paying down debt, and building income streams.

Adam Cecil
Published November 29th, 2020
Table of Contents
Key Takeaways
  • Before you do anything, gather information about your financial assets and debts. This will help you and your financial advisor build a picture of your current situation and prepare for retirement.
  • Making a concerted effort to reduce your spending and pay off debts can make living on Social Security benefits a lot easier.
  • Building other income streams through things like part-time work or home equity can also help cover the gap.

Every day, 10,000 Baby Boomers turn 65, and according to a 2019 study by Northwestern Mutual, 17% of them have less than $5,000 in personal savings. For many people, retirement is not something to look forward to, but instead something to dread, as they are unsure of how they’re going to be able to cover rent, medical costs, and daily expenses. The good news is that with some financial planning and lifestyle changes in your 60s, you can make positive steps towards a comfortable retirement, even if you currently have no retirement plan.

In this article, we’re going to discuss three major financial strategies: reducing spending, paying down debt, and building income streams. But before you do any of that, you’ll need to take a look at what you currently have in savings.

Evaluate your retirement assets

It’s crucial that you take stock in all of your existing assets, not just your retirement accounts, before you make a plan for how you’re going to live in retirement. Look at your cash savings, any employer pension funds, annuities, and retirement accounts like 401(k)s or IRAs, as well as physical assets, like your home, car, any antiques or collectibles, or anything else that you be able to sell or otherwise use to generate income. You’ll also want to collect information about any outstanding debts – a mortgage, credit cards, student loans, etc.

You should also take a look at what you can expect to earn from Social Security benefits. If you’re over the age of 60, the Social Security Administration will mail an annual statement to you that lays out your potential benefits. You can also request a statement online. In general, we suggest waiting as long as possible to take Social Security benefits, as your potential benefit increases every year between 62 and 70.

Once you have all of this information, we suggest speaking to a Certified Financial Planner who can help you build a plan out of your existing assets and priorities.

Reduce your spending

Many people naturally spend less in retirement, but in your case, you might want to make a concerted effort to reduce spending even more. Taking a look at your expected retirement income – both from your assets and Social Security benefits – can help you understand how much you need to reduce your current spending in order to live in retirement. (It can also help you understand how much you might need to earn from a part-time job, which we’ll cover in the next section.)

Housing is typically the biggest cost for retirees, with healthcare in a solid second place. If you own your home, there are a number of strategies for reducing costs, including downsizing, moving in with family, or raising the deductible on your homeowners insurance policy to lower your premiums.

Once you turn 65, you’re eligible for Medicare – we suggest signing up as soon as you can in order to reduce your out-of-pocket healthcare expenses, like insurance premiums.

Other ways to reduce household spending include buying generics instead of name-brand groceries or clothing, reducing regular bills by getting cheaper cable, internet, or cell phone plans, and taking advantage of senior discounts anywhere and everywhere that offers them.

Pay down your debt

Depending on what your debts look like, aggressively paying down your debts can actually be the best way to save for retirement. A lot of folks in their 50s and 60s try to save for retirement while avoiding their debts. But what’s the point when you’re just going to end up using that savings to pay these debts in ten years? Eliminating your debts now will make it easier to live on reduced income in the future – for most people, it’s much better to retire without debt than retire without a pension or savings.

Plus, putting too much money in investment accounts in your 50s and 60s can leave you vulnerable to short-term market changes, which could only serve to make your finances in retirement worse.

Build income streams

For the majority of people, Social Security serves as their main source of income in retirement. It’s a guaranteed, inflation-proof source of income that will last your entire life. Many retirees make the mistake of taking their Social Security benefits too early – while you can start taking benefits at age 62, your potential benefit actually increases every year up until you turn 70. That’s why we suggest that you wait as long as possible to take these benefits, and make up your income through other sources, like savings or part-time work. While you may be frustrated by having to work in retirement, it’s better to work now while you’re still able.

Even after you start taking Social Security benefits, it may not be enough, and part-time work can be one of the best ways to cover the gap.

If you own your home, you can use it as a potential source of income by getting a reverse mortgage, home equity loan, or a home equity line of credit (HELOC). All of these options have their own pros and cons, so consider them carefully with a financial planner.

You could also consider renting out part of your home on AirBnB or another similar service. This relatively passive source of income can also help you meet new people, and keep you from feeling isolated in retirement.

Bottom line

A lot of people are scared of retiring without money in savings or investment accounts. But by evaluating your assets, paying down debt, reducing your spending, and building up income streams, you can still have a comfortable retirement. Talk to a Certified Financial Planner® today to start making a plan.

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Adam Cecil

Writer, video maker, and podcast producer based in Brooklyn. Previously a staff writer at Policygenius, helping people find the insurance coverage they need. Find out more.

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