Is It Possible to Retire Without Savings?

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If you're worried you may not be able to retire, you're in good company. An AARP survey recently found that 20% of Americans age 50 and over have no retirement savings, which raises the question: Can a person without savings ever retire? The answer is yes, but it will require careful planning and budgeting .

The following tips may help you determine a plan of action.

Get the numbers down in black and white

If your mission is to retire comfortably, your plan should begin by establishing the amount of money you'll have coming in and going out each month.

Spending

Estimate your post-retirement budget and how much money you'll likely spend each month. If you add up all your current monthly expenses, how much does it come out to?

Look through your budget to determine how many of those bills you'll no longer have in retirement. For example, will your transportation costs decrease, or will you dine out less when you're no longer working? Can you have a car payment, credit card balance, or other debt paid off in full before retirement?

According to Fidelity, you can expect to spend between 55% and 80% of your current annual income after retirement. Your precise number depends on a number of factors, including your retirement lifestyle and healthcare costs. If Fidelity is correct, that means someone earning $50,000 annually can expect to spend between $27,500 and $40,000.

Income

Think about any sources of income you'll have once you've retired. For example, will you receive Social Security, pension payments, or money from any other source?

If you're due Social Security but aren't sure how much you can expect, creating a personal My Social Security account allows you to see your monthly payment.

Age 70 is when Social Security benefits max out, so provided you're healthy enough, you may want to consider working until 70. According to the Social Security Administration (SSA), your retirement benefit is increased for each month you wait to retire after full retirement age (FRA).

Imagine your FRA is 67, and you wait until you're 70 to retire. Your monthly payment will be 124% of what it would have been at 67. So, if you were expecting $1,800 at 67, you'd get $2,232 instead.

Identify the gap

Once you've estimated your monthly expenses in retirement and the amount of income you can expect, figure out if your income will be enough to cover bills. If not, determine how large a gap you need to fill.

Let's say your monthly income will be $2,000 but your expenses will run $3,000. You need to raise your income by at least $1,000 or lower your monthly bills by at least that much. Here are some ways you can increase your monthly income.

Rent out space

If you have an empty attic, basement, or garage, consider renting it out as storage space. You may be able to pull in an extra $100 or more per month by renting out your basement, for example.

Take on a roommate

If you're single, think about the people you know who'll be retired at the same time as you. Is there anyone who might want to team up Golden Girls –style to share expenses?

Consider a "gradual retirement"

If a desire to leave your current profession makes you long for retirement, consider leaving that field and moving into something you would enjoy more. In fact, depending on the amount of money you need to close the gap, you may be able to work a fun part-time job and pull in enough to cover expenses.

Build up a small business

If you play an instrument, consider giving lessons. If you're a great woodworker or seamstress, look at ways you can build a small business offering those services. The more runway you give yourself to build your business, the more confident you'll feel about saying goodbye to the traditional job.

Lower your expenses

Here are some ways in which you can lower your cost of living. Even better? You can adopt most of these money-saving strategies immediately.

Pay off debts

If you're not retired yet, now is a good time to focus on getting rid of as many debts as possible. A good debt payoff app can help. The less debt you take into retirement, the more wiggle room you'll have in your budget.

Shop around for better deals

Call your utility companies to negotiate your monthly bill. Shop around for cheaper homeowners or auto insurance. Downgrade your cellphone plan. And take advantage of every senior discount you're eligible for. AARP provides a comprehensive list of available discounts. If you sign up for automatic renewal, you can become an AARP member for less than $15 annually.

Downsize your home

Buying or renting a smaller property is one of the easiest ways to lighten the load. In addition to the monthly mortgage or rent payment, you're likely to save on the cost of utilities in a smaller home. But make sure you can afford to move; if you're currently paying a low mortgage rate or getting a steal on a rental, downsizing may not be the answer.

Most people look forward to an enjoyable retirement, and it's easier to enjoy retirement when you're not worried about money. If you're concerned that you may not have enough to live the retirement life you hope for, a good financial advisor can walk you through what you can expect and help you come up with a plan that works with your budget. Even if you don't have anything saved for retirement, there are steps you can take to make it work.

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