Can You Retire Without Savings?

Can You Retire Without Savings?

By Chris Casacchia

Published Wed, Aug 16, 2023

Millions of Americans are nearing retirement every year without financial security, a reverberation of stagnant wages, increasing living costs, medical expenses, and other economic factors. According to the latest data from the Board of Governors of the Federal Reserve System, about a quarter of U.S. workers do not have any retirement savings, a percentage that has remained steady since 2019.  So, what can retirees or those reaching retirement age do so late in the game to improve their odds of living comfortably?   

Start with lowering your cost of living, a key to boosting savings and living on Social Security or a pension plan alone, according to Melanie Musson, a retirement expert in Montana with “That might necessitate moving to a region with low housing costs and lower taxes,” she said. “Alternatively, a senior could stay in the same area but downsize their living arrangements. Many communities have low-income senior apartments.” 

Living on Single-Source Income   

Challenges can be overwhelming for retirees solely relying on Social Security or a pension, forcing many to seek low-cost housing options, public assistance programs, and/or relying on family support. 

“Social Security payments can be too small to cover the cost of rent, food, prescription drugs, and other basic needs,” said Fred Winchar, cofounder, and CEO of MaxCash, a financial brokerage in Scottsdale, Ariz. 

Timely planning and resourcefulness, finance experts contend, can alleviate some of these pressures while paving a path to a comfortable and fulfilling retirement. 

“People on Social Security or pensions can maximize savings by taking advantage of senior discounts, investing in low-risk assets, avoiding high-interest debt, and choosing cost-effective healthcare options,” said Bill Gallagher, a certified financial planner with Zynergy Retirement Planners in Red Bank, New Jersey. 

Retirees with no savings should explore social services, including nutritional assistance programs, Medicaid, and federal programs like Temporary Assistance for Needy Families, advises Tom Koesternen, a chartered financial analyst. 

“Social safety nets like Supplemental Security Insurance are excellent because they do not require payments to qualify for these benefits. You can enroll in a pay-as-you-go program and live happily,” he said. “Similarly, the Earned Income Tax Credit provides assistance through the tax system.” 

Side Hustles 

For those with little to no savings, real estate side hustles could help augment Social Security or pensions, suggests Doug Van Soest, cofounder of Socal Home Buyers, a real estate investment company. 

“Renting out a room or utilizing home-sharing services like Airbnb can also generate additional income,” he said. 

Consulting in your field of expertise or for a former employer might be an option for some. And passion projects could turn into an income stream on eBay or other outlets to offset some bills. 

“Another option is to consider part-time work or freelance opportunities, which can provide additional income to supplement Social Security or pension payments,” said Jeremy Nitta, a trading expert in Downers Grove, Ill.  

Retirement Abroad?  

For the more adventurous and well-traveled, a foreign destination could provide more savings than stateside.  

Americans can receive social security payments in nearly every country, and income is typically enough to qualify for residency in countries with retirement visas, according to Jen Barnett, who runs Expatsi, a website that helps people move abroad. 

Popular destinations for frugal retirees these days include Mexico, Panama, Spain, and Costa Rica. 

“Housing prices have risen everywhere as they have in the U.S., but as one city or country becomes out of reach, another becomes popular,” Barnett said. “Costa Rica especially has seen a huge influx of retirees because of its safety and stable government, which has made it pricier.” 

Reversing Cash Shortages 

Reverse mortgages are another potential option for retirees 62 and older to supplement their income by converting a portion of their home equity into cash and eliminating required monthly mortgage payments. The loan must be repaid when the borrower sells the home, moves out, or dies. It can also come due if the borrower defaults on the loan terms by failing to pay taxes or insurance or maintain the home. 

Reverse mortgages can be a useful financial tool for retirees with significant home equity but come with potential drawbacks, like reduced home equity available to pass on to heirs, according to Phoenix real estate investor Corey Tyner, who breaks down some pluses and minuses.   

“Whether or not a reverse mortgage is a good option depends on a variety of factors, including the borrower’s age, home equity, financial goals, and lifestyle,” Tyner said.  

Kevin Walton, a certified reverse mortgage specialist and residential mortgage loan officer at C2 Financial Corp. in Thousand Oaks, Calif., said self-serving interests shouldn’t be ruled out either. 

“It’s a wonderful thing to want to leave all your money and home equity to your kids and charities, but it should not come at the expense of your own quality of living,” he said. 

“Using a portion of your unlocked home equity for yourself is not a bad thing.” 

This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.