How to Retire In 10 Years with No Savings (2024)

Despite having nothing saved for retirement, it’s possible to retire in as few as 10 years. By cutting your cost of living to the bone and saving every available penny, almost anyone can accumulate sufficient assets to generate enough investment income to stop working for good within a decade. This approach takes a lot of discipline, consistency and focus, as well as a willingness to compromise on the enjoyment of life’s extras you’ll have now and in retirement. And it’s likely not for everyone. Talk to a financial advisor about your retirement savings plans.

Is It Possible to Retire In 10 Years with No Savings?

The traditional approach to funding retirement is to work for approximately 40 years and save about 10% of your income each year. During these accumulation years, you build a portfolio of risk-appropriate investments, preferably in tax-advantaged accounts. You stop working at around age 65 and rely on your investments, Social Security benefits and if you’re lucky, a pension. All in all, these sources should generate about 70% of your pre-retirement income.

But what if you’ve worked for decades and haven’t started saving for retirement? It’s possible to make up the savings gap in 10 years, but you’ll have to make some significant sacrifices now. This strategy calls for a combination of stringent restrictions on spending, outsized contributions to savings, conservative investments and a willingness to settle for a less-than-luxurious lifestyle in retirement.

Retiring within 10 years also requires a measure of luck, since events such as illness, accident, disability, job loss, economic downturns and other hard-to-foresee developments can derail the entire process and significantly delay retirement.

Retiring in 10 Years: Step by Step

You can retire in 10 years even if you only earn an average annual salary, have nothing saved and won’t be eligible for Social Security or a pension. Here are the basic steps to follow:

1. Make the Commitment

The first step in preparing to retire in 10 years is simply deciding that you want to do it. The level of commitment and compromise this financial plan requires means it is not for everyone. Only someone fully dedicated to saving enough so they can retire in 10 years is likely to start the process and see it through.

2. Cut Your Costs

Assuming you want to go ahead, you will have to drastically slash your living expenses. This is not a matter of foregoing a daily latte on the way to work or driving a car a few years longer than you have done in the past. The idea is to live on just 25% or so of your income.

A 40-year-old American earning the average annual salary for people in that age group would need to cut their expenses to about 25% of $62,244 or $15,556 per year. That means making major changes like relocating to a low-cost area and downsizing your home, riding a bicycle or taking public transit instead of owning a car, shopping at thrift stores and maybe even growing some of your own food.

3. Save 75% of Your Income

This is perhaps the most difficult step. Saving 75% of your income will be extremely challenging, especially for people with families, but you’ll want to start by maxing out your 401(k), IRA and/or other retirement accounts. In 2023, you’re allowed to contribute up to $22,500 to a 401(k) and $6,500 to a Traditional or Roth IRA. If you’re 50 or over, you’ll want to take advantage of the permitted catch-up contributions, which can supercharge your retirement savings. The IRS allows people 50 and older to save an extra $7,500 in their 401(k) and $1,000 in their IRA.

After maxing out your retirement accounts, consider saving any extra cash in a brokerage account or even a health savings account (HSA) if you’re enrolled in a high-deductible health plan.

4. Invest Your Savings Wisely

An investment in a basket of large-company stocks has returned an average of 10% annually over many years. With a relatively short 10-year time frame, however, it’s probably more risk-appropriate to invest in a diversified portfolio of stocks, bonds, cash and other assets and aim for an 8% annual return. Of course, this will depend on current market conditions. For example, 2022 was a particularly rough year for investors, as the lost nearly 20% and Nasdaq fell by 33%.

Assuming an 8% annual return is achieved, after 10 years of investing approximately $45,000 per year, you will have a retirement nest egg of about $700,000.

5. Invest for Income

Now it’s time to stop working and live off the proceeds. There are many ways to generate income, but investing in dividend-paying stocks is one of the more popular ways to fund retirement. A typical portfolio of blue-chip dividend stocks pays about 3%. Three percent of $700,000 is $21,000 per year. This is the amount you’ll have to live on in retirement. It’s not a lot, but it’s more than you’ll have been living on while you were working, so it should be adequate even after accounting for fluctuations in dividend yield over time.

The Downside of Retiring In 10 Years

The extremely spartan lifestyle required to retire in 10 years with no prior savings is a major downside. It calls for accepting exceptionally tight spending controls while working, and similar restrictions after retirement. A post-work life of travel, golf and cruises probably will not be part of this strategy. Only people who value financial independence over financial comfort are likely to be able to commit to it and succeed at it.

Retiring in 10 years also requires a measure of luck. Illness, accident, disability and unemployment are all potential unforeseeable events that could derail this strategy. It’s also not likely to be a viable option for someone who wants to have a large family, contribute financially to charity or leave behind a large legacy.

Bottom Line

Retiring in 10 years is possible even if you haven’t saved anything so far. However, it requires foregoing ease and luxury now and in the future in exchange for amassing enough assets to sustain a secure but minimally comfortable lifestyle. Still, drastic cost-cutting and equally drastic saving can combine to accumulate enough assets to produce sufficient income to live on within 10 years or even less if that is a truly essential goal.

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