According to the 2023 Northwestern Mutual Planning & Progress study,Americans report having less than $90,000 on average in retirement savings. Individual retirement accounts (IRAs) and 401(k) savings plans strive to compensate for the lack of traditional pension plans, however, many Americans have not been able to take advantage of these or cannot afford to save enough for retirement.
Key Takeaways
- Leaving the workplace at age 65 may mean funding over 20 years of retirement.
- Retirees often scale back their lifestyle or downsize to supplement retirement.
- Those without adequate retirement funds may need to continue to work past retirement age.
Funding Retirement
Retirement means the end of a steady income, which is why having a nest egg is important. Some financial experts say retirees need up to 80% of their pre-retirement income once they stop working. An annual income of $100,000 means $80,000 will be needed each year to maintain an individual's lifestyle. Without savings or a pension plan, retirees need to either continue earning money or cut back on their spending.
For those who enter retirement without saved cash, their only source of income is commonly Social Security. Most individuals aged 65 and older receive the majority of their income from Social Security and without the benefits, 38.7% of these adults may fall below the official poverty line.
Historically, many workers relied on corporate pension plans to fund their retirements but those plans have decreased in the past decades. Some government jobs still have pensions, however, those jobs may not have had Social Security taxes withheld, and decrease the retiree's Social Security benefit.
Relying on Social Security
With the average monthly Social Security retirement benefit check at $1,907 in 2024, it can be a big shock to those who earned more while working. On average, Social Security replaces just 40% of a retiree's pre-retirement earnings. Although there are ways to maximize it, Social Security still functions best as an adjunct to personal savings.
When considering healthcare costs like Medicare premiums, food and housing, personal debt, and other financial obligations many retirees carry, it's clear why living solely on Social Security may not work.
$1,907
The average monthly Social Security benefit in 2024.
Downsize
Without savings, it will be difficult to maintain the same lifestyle an individual had in working years. Some retirees make adjustments by:
Continue to Work
To keep up with basic expenses in retirement, many need an extra income stream. This could mean going back to work or getting a part-time job. The Internet makes it easier than ever for retirees to work remotely. According to AARP, retirees who work part-time, freelance, or do consulting work tend to increase their retirement satisfaction by providing a sense of purpose and community.
According to a survey conducted by ResumeBuilder, 12% of retired Americans say they are very likely or somewhat likely to go back to work in 2024.
How Can Retirees Use Their Home to Supplement Retirement Income?
Individuals who have not saved for retirement and who still own homes can turn to their homes as a source of income. For some, this could mean renting a portion of their space as a separate apartment. Another option is to take a reverse mortgage on a home, although doing so can be costly and complicated.
How Can Individuals Save More Toward Retirement?
How and where workers save can be as important as how much they save. Financial vehicles behave differently and are taxed differently so exploring diversification can help minimize the impact of taxes, market volatility, and inflation.
What Is the Average Retirement Age in the United States?
In 2023, the average age for men to retire was 65 and the average age for women to retire was 63.
The Bottom Line
Retiring without savings requires sacrifices and strategies. Social Security may not provide enough money for most people to maintain their pre-retirement lifestyles. For some, downsizing or working part-time can provide a supplement to Social Security.
FAQs
Individuals who have not saved for retirement and who still own homes can turn to their homes as a source of income. For some, this could mean renting a portion of their space as a separate apartment. Another option is to take a reverse mortgage on a home, although doing so can be costly and complicated.
What to do if you didn't save for retirement? ›
10 Things To Do If You Want To Retire Soon But Have No Savings
- Go through your expenses and look for ways to cut back. ...
- Take advantage of tax-sheltered retirement accounts. ...
- Try to pay off your debts by the time you retire. ...
- See how much you qualify for in Social Security benefits. ...
- Become an expat. ...
- Work longer.
What if I don't have enough money to save for retirement? ›
If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.
What age is too late to start saving for retirement? ›
It is never too late to start saving money you will use in retirement. However, the older you get, the more constraints, like wanting to retire, or required minimum distributions (RMDs), will limit your options. The good news is, many people have much more time than they think.
Can I retire at 60 with 300k? ›
Yes, you can. As long as you live strictly within your means and assuming certain considerations, such as no significant unexpected costs and no outstanding debts.
What happens if I retire with no savings? ›
Many retirees with little to no savings rely solely on Social Security as their main source of income. You can claim Social Security benefits as early as age 62, but your benefit amount will depend on when you start filing for the benefit. You get less than your full benefit if you file before your full retirement age.
What happens to old people who don't save for retirement? ›
Unless you have a secret plan to get free money or you're lucky enough to hit the lottery, not saving enough for retirement will leave you scrambling to get by in old age. At the very least, you'll need to work longer or make serious adjustments to your lifestyle to get by.
What is the $1000 a month rule for retirement? ›
The $1,000-a-month retirement rule says that you should save $240,000 for every $1,000 of monthly income you'll need in retirement. So, if you anticipate a $4,000 monthly budget when you retire, you should save $960,000 ($240,000 * 4).
Is $20,000 a good amount of savings? ›
Is $20,000 a Good Amount of Savings? Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.
What if I haven't saved for retirement at 50? ›
If you didn't make saving for retirement a priority early in life, it's not too late to catch up. At age 50, you can start making extra contributions to your tax-sheltered retirement accounts (called catch-up contributions). Younger workers can only contribute $23,000 to their 401(k)s and $7,000 to their IRAs in 2024.
With a $300,000 fixed immediate annuity, a 65-year-old man could receive around $1,450 to $1,950 per month for life, while a 65-year-old woman may get $1,800 to $2,200 per month. These payments are guaranteed for as long as the annuitant lives.
How long will $400,000 last in retirement? ›
Using our portfolio of $400,000 and the 4% withdrawal rate, you could withdraw $16,000 annually from your retirement accounts and expect your money to last for at least 30 years. If, say, your Social Security checks are $2,000 monthly, you'd have a combined annual income in retirement of $40,000.
How long will $300,000 last in retirement? ›
Let's walk through the scenario. With $300,000 planned for your use as a retiree, a retirement age of 50, and an anticipated life expectancy of 85 years, you need that money to last you 35 years. This should mean that your yearly income is around $8,571, and your monthly payment is around $714.
Do people regret not saving for retirement? ›
21 percent of Americans said not saving early enough for retirement was their biggest financial regret, according to a Bankrate survey.
What if I run out of money in retirement? ›
If you run out of money in retirement, there are still options for you to get enough money to live off. However, you may need to make lifestyle changes that reduce your quality of living, such as going from a house to an apartment or selling your car and walking to places.
What percent of people don t save for retirement? ›
That's not much to fall back on in retirement. As many as 28% of Americans have nothing saved for their retirement, 39% aren't contributing to a retirement fund and another 30% don't think they'll ever be able to retire. That's according to a new GoBankingRates survey.
Is 50 too late to start investing? ›
There's still time to put money into stocks
But the good thing about being in your 50s is that you're not necessarily on the cusp of retirement. You might conceivably be anywhere from 10 to almost 20 years away, depending on your specific age and retirement plans.