How to Retire With NO Retirement Savings?
***Disclaimer – I’m not a financial advisor, just a normal guy with financial success. The information shared here is purely for educational purposes only***
That’s a very good question; it’s a question that many Americans (unwillingly) have to find out because so many of them do not have any or very little retirement savings. Let’s explore this a bit and see if we can actually make this work.
Whether it can work or not of course, depends on various factors.
Possible Solution #1 Pension
If you have $0 in retirement but receives 75%, 80%, or even 100% in your pre-retirement salary for the rest of your life, then it may be enough to cover your living expense. This would also depends on how much you spend every month, so it’s possible you may still have to make some lifestyle change even with the lifetime pension. This type of benefits is getting rarer and rarer because it’s unsustainable in the long run for the benefactor.
What most companies and organization, and even the US military now do is encourage the employees to contribute to their retirement and the organization matches up to a certain percentage points as a benefit. This way the organization won’t be on the books for hundreds and thousands of dollars’ worth of pension for each employee when the employee hits retirement
So unless you retired a while ago or has been grandfathered into this type of benefit, this is probably not your best bet.
Possible Solution #2 Social Security
Average security check in 2021 was around $1,500 a month, you may be able to get a little more if you work till the full retirement age of 67. While $1,500-$2,000 may not sound like a lot, it might be enough if you are able to live frugally and modestly.
It would certainly help a lot if your house and car is paid off, or you find somewhere with very cheap rent. If upkeep to your house and car(s) cost too much, consider downsizing and or sell off excess car. Car especially since it’s not a common appreciable asset. If anything, car tends to depreciate and not appreciate in value.
Possible Solution #3 Sell Off Asset(s) / Downsizing
We touched on this in solution #2, downsizing if you have a house that is paid off or considerable equity in a house that you can sell off and purchase a smaller and cheaper house. For example, if you own a house that is worth $500,000 and you have 90% equity, or $450,000, consider selling that and take the cash to buy a house that is around $150,000 or $200,000. You would be left with $250,000 to use in retirement.
Of course, since you have no additional income coming in in this scenario, you would still have to be careful with your spending. But at least you would have $250,000-$300,000 to live off of for the next 20-25 years or longer.
If you have multiple cars and they are paid off, also consider selling them off as well. This would not only bring in some additional cash, but also save money with car insurance. At this stage of the game, you absolutely want to eliminate unnecessary spending and focus on survival.
Solution #4 Part Time Work in Retirement
Another way to survive without retirement savings is simply to work some more in retirement. If you are able to cut back on spending and expenses and make some money working part time, this could work.
Some retiree have also reported boredom and lack of purpose in retirement, so being able to do some work in retirement might actually work out well for some people. If you have an expert skill in a particular field, being a part time consultant is certainly very lucrative.
Solution #5 Live off Passive Income
If you don’t have retirement savings, hopefully you have some passive income streams that are more or less automated on their own; assets such as websites that generate income, YouTube video monetization, and rental properties etc.
Truth be told, when you have multiple income streams and they are set up well for the long haul, many people reported make six figures monthly and don’t really have to rely on retirement savings even in retirement.
Some successful individuals have claimed that they only work 5-10 hours a week and still make well above six figures each month. So it’s possible with the right business models and you see the sustained success of your online business ventures.
Solution #6 Reverse Mortgage
If you don’t want to sell off your house and downsizing, there is also the option of doing a reverse mortgage. With regular forward mortgage, The bank owns the house and you slowly pay it off over time, usually for 30 years.
With reverse mortgage, you start out owning the house and the bank / institution pays you a given amount every month so they slowly build equity on the house. When you move out, sell the house, or passes away, the bank or institution would then take over the house.
This could be a viable solution for those with zero to very little savings.
Solution #7 Combinations
Surviving retirement with no savings doesn’t have to have just one solution, you can combine multiple ideas. For example, maybe the pension only caps out at $5,000 and you still get $1,500 from social security income every month. That will net you $6,500 a month or $78,000 a year. That’s a good amount of money to live off of.
Another example would be that you get $1,500 from social security and your part time job nets you around $4,000 a month. That well give you $5,500 a month or $66,000 a year.
Or maybe you have sell off your house which is already paid off and pocket $250,000. You get a $2,000 pension, $1,500 in social security check, and $1,500 in part time work, your total monthly income would come in at $5,000 or $60,000 a year.
If you live modestly, $60,000 a year is enough to live off of in most parts of the United States. If you spend more than $60,000 in a given year, then you still have the $250,000 savings you sold the house for to fall on.
In Conclusion
While I don’t recommend it, I think it’s possible to live with zero or very little retirement savings. Again, I don’t recommend it, but if you have enough other variables lined up right, you just “might” make it.
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***Disclaimer – I’m not a…