This Is What Life Without Retirement Savings Looks Like
Many seniors are stuck with lives of never-ending work—a fate that could befall millions in the coming decades.
CORONA, Calif.—Roberta Gordon never thought she’d still be alive at age 76. She definitely didn’t think she’d still be working. But every Saturday, she goes down to the local grocery store and hands out samples, earning $50 a day, because she needs the money.
“I’m a working woman again,” she told me, in the common room of the senior apartment complex where she now lives, here in California’s Inland Empire. Gordon has worked dozens of odd jobs throughout her life—as a house cleaner, a home health aide, a telemarketer, a librarian, a fundraiser—but at many times in her life, she didn’t have a steady job that paid into Social Security. She didn’t receive a pension. And she definitely wasn’t making enough to put aside money for retirement.
So now, at 76, she earns $915 a month through Social Security and through Supplemental Security Income, or SSI, a program for low-income seniors. Her rent, which she has had to cover solo since her roommate died in August, is $1,040 a month. She’s been taking on credit-card debt to cover the gap, and to pay for utilities, food, and other essentials. She often goes to a church food bank for supplies.
More and more older people are finding themselves in a similar situation as Baby Boomers reach retirement age without enough savings and as housing costs and medical expenses rise; for instance, a woman in her 80s is paying on average $8,400 in out-of-pocket medical expenses each year, even if she’s covered by Medicare. Many people reaching retirement age don’t have the pensions that lots of workers in previous generations did, and often have not put enough money into their 401(k)s to live off of; the median savings in a 401(k) plan for people aged 55 to 64 is currently just $15,000, according to the National Institute on Retirement Security, a nonprofit. Other workers did not have access to a retirement plan through their employer.
That means that as people reach their mid-60s, they have to either dramatically curtail their spending or keep working to survive. “This will be the first time that we have a lot of people who find themselves downwardly mobile as they grow older,” Diane Oakley, the executive director of the National Institute on Retirement Security, told me. “They’re going to go from being near-poor to poor.”
The problem is growing as more Baby Boomers reach retirement age—8,000 to 10,000 Americans turn 65 every day, according to Kevin Prindiville, the executive director of Justice in Aging, a nonprofit that addresses senior poverty. Older Americans were the only demographic for whom poverty rates increased in a statistically significant way from 2015 to 2016, according to Census Bureau data. While poverty fell among people 18 and under and people 18 to 64 from 2015 to 2016, it rose to 14.5 percent for people over 65, according to the Census Bureau’s Supplemental Poverty Measure, which is considered a more accurate measure of poverty because it takes into account health-care costs and other big expenses. “In the early decades of our work, we were serving communities that had been poor when they were younger,” Prindiville told me. “Increasingly, we’re seeing folks who are becoming poor for the first time in old age.” source
Retirement Without Savings: What Are Your Options?
It may not be ideal, but it’s the difficult reality for many Americans
According to the 2023 Northwestern Mutual Planning & Progress study, Americans report having less than $90,000 on average in retirement savings.1 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.2
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.3 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.4
Historically, many workers relied on corporate pension plans to fund their retirements but those plans have decreased in the past decades.5 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.6
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.7 On average, Social Security replaces just 40% of a retiree’s pre-retirement earnings.8 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.
Downsize
Without savings, it will be difficult to maintain the same lifestyle an individual had in working years. Some retirees make adjustments by:
- Moving into a smaller home or apartment
- Reducing television or streaming services
- Cancelling gym memberships
- Driving a less expensive car
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.
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.1
Northwestern Mutual. “What Is the Average Retirement Savings by Age?”
How to start saving for retirement if you’re starting late
It’s never too late to start saving for retirement. Consider these strategies to help you maximize your savings as you get closer:
Know your savings gap
Even if you feel far off from your retirement goal, having a savings target is still beneficial. What amount do you need to cover your expenses? Knowing this number can give you a better idea of your options to close the gap between your living expenses and what Social Security will provide.
Not sure what your number is? Try out our retirement income planning calculator.
Maximize retirement account contributions
If you’re nearing retirement with little to no savings, put away as much as you can now. There are several tried and true ways to save with tax-advantaged accounts:
Take advantage of tax-advantaged retirement plans
Defined contribution plans, like 401(k)s, provide a great way to save for retirement in a tax-advantaged way. You can generally contribute up to $23,000 annually (for 2024) and make an additional $7,500 per year with a catch-up contribution if you’re 50 or older. If offered, you may have an employer match up to a percentage of your contributions. If you aren’t taking advantage of the match, you are leaving free money on the table.
You can usually start withdrawing from these plans as early as age 59½, but you often must begin taking required minimum distributions at a specific age.
Open a traditional or Roth IRA
IRAs offer tax advantages similar to a defined contribution plan. You make contributions that grow tax-deferred and allow for compound growth over time. For 2024, you can save up to $7,000 in an IRA, and an additional $1,000 if you’re 50 or older.
The two primary types of IRAs are traditional and Roth:
Traditional IRA
Traditional IRAs are funded with pre-tax contributions. These contributions may be tax-deductible and could lower your taxable income. Taxes will be due once it’s time to make withdrawals. There are no income limits to participate in traditional IRAs.
Roth IRA
Roth IRAs are funded with contributions made with after-tax dollars—so they are not taxed as income. The tax benefit comes at the point of withdrawal—earnings and qualified withdrawals are tax-free. Unlike traditional IRAs, there are income limits to participate.
- If you make less than the modified adjusted gross incomes (MAGIs) listed, you can contribute to a Roth IRA.
- If you make between the MAGIs listed, you can contribute but it will be a reduced amount.
- If you make equal to or more than the MAGI limit listed, you can’t contribute anything to a Roth IRA. If this applies to you, check out these alternatives.
| Filing status | 2024 modified adjusted gross income (MAGI) to contribute to a Roth IRA |
| Single or head of household | $146,000-$161,000 |
| Married filing jointly | $230,00-$240,000 |
| Married filing separately | $0-$10,000 |
Explore other investments
Whether you invest through an employer-sponsored retirement plan or a brokerage account, there are several ways to invest your money—depending on your risk tolerance and how close you are to retirement.
- Stocks are considered a risky asset given their volatility. The potential for a high return makes stocks a great option if you’re far from retirement and can ride out any dips in the market.
- Bonds are loans to the government, corporations or municipalities that are paid back to you at a specified interest rate. Bonds don’t have the same growth potential as stocks, but they are also exposed to less risk—making them a better fit if you’re closer to retirement. But, the return on bonds is not guaranteed.
- Certificates of deposit (CDs) are purchased in exchange for a fixed growth rate from a bank or credit union, making them a safe, low-risk investment—typically a high priority as you’re nearing retirement.
- Annuities are insurance contracts you can purchase in exchange for a fixed income. You can purchase annuities with no exposure to the market, providing predictability that many late-savers look for.
Get professional guidance with your retirement plan
No matter how close you are to retirement, you can still prioritize saving for it. A Thrivent financial advisor can work with you to calculate your savings goal and create a customized, realistic savings plan. If you’re part of the percentage of the population with no retirement savings, retirement may look different than you originally planned. But even if you’re living with less, you can still live an enjoyable life beyond your working years. source
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 63.11
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. source