Smart SpendingSmart Spending

How to retire with no savings

Millions of Americans are doing it.

By MSN Money Partner Apr 27, 2011 3:53PM

This guest post comes from Pop at Pop Economics.


Have you read the news lately? Soon-to-be retirees have saved almost nothing for retirement. No doubt that means we'll soon have homeless baby boomers begging for change on the subways!


OK, the second part might not happen. But given the press that a recent Employee Benefit Research Institute report (.pdf file) has gotten, you'd be forgiven for thinking so.


Make no mistake, the numbers are terrible. Only 44% of Americans have more than $25,000 in savings. About 54% of workers older than 45 have more than $25k. And of actual retirees, only 46% have more than $25k in savings.


Using the rule of thumb that you can draw down 4% of your nest egg in retirement's first year -- faulty, but it's a starting point -- $25,000 in savings gives you about $1,000 in income. With Social Security, you're probably talking $14,000 per year, which puts you in the ballpark of the incomes in countries like Libya and Panama, depending on how you're making your comparison.

And yet, these soon-to-be retirees and actual retirees are in the United States. Which begs the question: How are they doing it? And is life really so bad for poor retired people?


The life of a retired non-saver

First, let's look at actual incomes of retirees as clues. A 2005 report (.pdf file) by the U.S. Census found that the median income of someone age 65 and older in 2003 was about $24,000 -- or $29,000 in today's dollars. That's a pretty severe drop-off from the median $49,000 income that people age 55 to 64 had.


Those who are 65-plus are also taking less of an income as they age. The same report found that the median household took about $33,000 in income between 65 and 69, but by age 75 the median household had an income of only $19,000.

About 17% of those 65 and older live in or close to poverty, which is about the same as the population as a whole, but that was skewed by those over age 75. The real old-timers had a near poverty rate of almost 20%.


But on average, their living arrangements were fine, according to the report. Most had furnaces, A/C, a full kitchen, etc.


No, you're not working until you die

You might have heard somebody say something to the effect of "I'm probably going to work until I die." Either that's been a conscious choice (no point in saving!) or it's a "reality" they've come to as 65 neared and they hadn't saved nearly enough. Post continues after video.

Except that's not what actually happens. According to the Labor Department, fewer than one in five workers over age 65 have a job or are looking for work. Once you get to age 75, only 7% or so fit that profile. Slightly sadder, most of that 7% are looking for work but don't actually have a job.


Age discrimination might be part of it. But so could mental or physical disabilities and the generally weak job market right now. Whatever it is, most Americans older than 65 are unable or unwilling to hold down a job as they age.


Quick! Picture your perfect retirement.


Did you imagine a beach scene with white sand and crystal-clear blue water? No? Well, when you ask people to picture a perfect retirement, most people have at least something related to travel.


Unfortunately, retirees aren't actually doing it, at least not any more than the rest of us.

According to the Labor Department, older Americans (65+) spent about 400 hours -- or 16 days -- on average on "Other Leisure" time, which basically includes anything that's not TV, socializing, relaxing and reading. Even if all of that leisure time were devoted to travel, that's not any more than the three weeks of vacation you're probably earning by the age of 30. So much for that round-the-world trip!


So what are they spending time doing? They're watching TV -- about 4.4 hours of it per day. That's quite a bit higher than the 3.3 hours Americans of all ages watch on a weekend day. By comparison, the older Americans spent less than an hour per day on average with friends.


So, let's try that again. Quick! Picture your probable retirement!


Did you imagine a TV screen showing "Monday Night Raw"? You can file that under sad, but true.


It's about how you want to live

Once you hit age 50, your chances of being jobless start to rise rapidly. You don't get to choose when you retire. The job market or your ailing body will decide for you. Many retired Americans are getting by on incomes that you'd probably consider appropriate for the Third World. And even if they wanted to work until they died, they can't.


Social Security allows them to live adequately, but not richly, and certainly not in the ways you dream about.


That's why you're saving for retirement. It's not so you can retire. It's so your retirement looks more like white beaches and blue skies than "Monday Night Raw."


More on Pop Economics and MSN Money:

Apr 28, 2011 9:33AM

Once again, misleading title, article of little substance.


Personally, I don't know anyone my age that has much, if any money squirreled away. (I am 55) My husband and I were both forced to retire early due to a series of unfortunate events and health concerns. We survive on SS and SSD and a little bit of income I get from a part time elder care job. 


We live below the poverty level and compared to just about anyone in third world or developing nations we have an extremely comfortable life. Even by standards in the US we are doing OK. We are warm and/or cool and have plenty to eat. We even manage to save a little bit on occasion to take a trip to see the family. We drive an older car, actually we just had to buy another last year, paid it off in 10 months. It is not fancy but it is in good shape and serves us well. We do not have a big screen TV, nor an Iphone or IPad, no expensive jewelry or clothing. For entertainment we garden and fish. We watch movies on TV sometimes and read a lot. Occasionally we get together with friends to cook out, drink some beer and talk about the grandkids. We do the work on our house ourselves unless it is beyond our physical capabilities and we talk to each other.


Is it what we had planned for? Nope, we were supposed to be on a beach in Mexico where our retirement money would have more value. But seeing as how Mexico is circling the drain it may have all worked out for the best. Today in America the middle class and the working poor cannot save for retirement. They can try, but are one illness or household disaster from losing much more than just their savings.


These articles are useless to the average working American and this one was more useless than most. The point is that we need to stop believing that the quality of our lives is determined by how much expensive stuff we have. It is amazing how much easier life is if you don't covet what you see in the ads that bombard us day in and day out. There is also the train of thought that if you have it, you should get rid of it. (or at least not replace it with the newer better model), many many less things to worry about.

Apr 28, 2011 8:57AM

we live in a country where if you're "old" you need to be out of the picture.  The youth of America think "go find a corner & die". Harsh?!  Reality! They forget they will one day be old.  We do not treasure our senior citizens in this country we look @ them as a burden.


I am 47 yrs old & will have a decent retirement.  My daughter tells me she'll take care of me when I'm old!  I ask her "how? you don't even WANT to hold down a job for yourself & kids you keep coming to us geezers for $$"  We finally told her no more $$ for you.  We are looking @ our retirement.  She got mad!


So youth of America I say start saving now for YOUR retirement because you're kids will do the same to you!  I will NEVER be dependent on my children thank God!



Apr 28, 2011 7:24AM

Maybe some people don't wish to retire like most.  Who is anyone to define another person's happiness and what gives their life fullness and purpose?  Just because a vast majority of people spend their lives killing themselves and racking their brains on how they can save millions doesn't mean everyone wants to swim in that sea.


Some people are more sensible and balance, thrive on the natural pleasures of life and not one that is monetarily costly, wasteful and narcissistic.  I love the people who know the difference between true happiness and keeping up with the Joneses...

Apr 28, 2011 9:56AM
My wife and I are both retired. Living on Social Security and small (and I mean SMALL) retirements. We're doing just fine financially mainly because we worked very hard to pay off our big bills (house and car) BEFORE we retired.
Apr 28, 2011 8:30AM
Article title is "HOW TO retire with no savings" - there is no 'HOW TO" , just a list of statistics.
Apr 27, 2011 6:03PM
Let the Baggers destroy Medicare and Social Security (only after they get theirs) and you will have seniors dying alone from  all sorts of causes from non-treatment of medical disorders, unable to afford medications or down right starvation.

But them big companies need them tax cuts.

I paid 35 years into SS.  It's not an entitlement!!  I paid for it.  Try to take it away and Baggers will regret it. 

Apr 28, 2011 11:39AM
I think people could still live a good life if they did things the way my parents (and I) did.  You don't have to have dual incomes if you only have one car.  Then one of you can stay home with the kids, eliminating babysitting and job expenses.  Buy a smaller house than you can afford.  Save the difference.  Pay your bills before you buy anything discretionary.  I can remember having people over to play cards and drinking kool aid because we couldn't afford booze.  We still had fun.  Things improved as we got older and my husband started making more.  And from doing without, we appreciated it much more when we started doing better.  Today's kids, I am sorry to say, don't know anything about sacrifice or patience.  They want to start off where dad ended.  Can't be done if you want to live a paid for life.  We're retired now and doing really well.  All that sacrifice paid off in the end.  And we even put all the kids through college, so now we can spend all our saving and not worry about them........let them save their own money.  But I hope we all make sure Medicare and Medicaid and SS will be there for them, too.   Fricking teabaggers.
Apr 28, 2011 11:34AM
We have been living on $27,000.00 a year for most of our married life of 35 years.  I stayed home to raise the kids.  After they were older, I got a part time job and our income went up to $35,000.00 for about 8 years.  Now I am disabled and can't work outside of home, so we are back to $27,000.00.  HOWEVER, we have paid off 3 houses, educated 2 children, and are not in debt to anyone. We have $30,000.00 in savings.  I don't understand why I am considered to be living in poverty...we have everything we need (not fancy stuff) and we are as happy as can be.  When my husband retires in 5 years, we feel that we will be able to take trips to see our grandchildren a couple of times a year...who could ask for more?
Apr 28, 2011 3:19AM
The problem is most people don't have a retirement plan. After carefull planning I will retire with millions in the Bank...soon as that Lotto pays off.
Apr 28, 2011 8:00AM
It's absolutely true that once you hit your 50s you can find yourself "retired" and unable to find a job. I know because I've been looking for more than 3 years. I've gone through all my savings and have had to learn to be creative in order to survive. NOT what I expected for this time in my life.
Apr 28, 2011 12:09PM
I am one of those who were forced into retirement while in my early fiftes. Not through any disability but through actuarial statistics that show increased medical costs for 'aging' employees and a glut of young people looking for work at beginners wages.

When I saw this coming, though, I started to write. I now have two reasonably successful novels in both print and Kindle format and a third that will be published later this summer.

I had to start collecting Social Security as soon as I turned 62  to eake out an income while sales grew to a sustainable level, but as soon as I can I will stop the Social Security payments and get back to paying in.

Needless to say, I am well into writing my fourth novel...

Don't ever quit on yourself.

Apr 28, 2011 11:14AM
My retirement plan is simple:  Pay off the house, live modestly, save moderately, and grow old with a bunch of cats.  Then when I die, I leave everything to the cats.
Apr 28, 2011 9:52AM
What bull, I have been on SS/D since 1999 and now SS. Have not gone without anything I needed or wanted. You learn how to live on what you get. Do I need to keep up with the rich? no sure dont. I am 65 happy and comfortable on SS.
Apr 28, 2011 10:01AM
I have come to accept, and embrace, the fact that I probably need to expect to spend my retirement years living in a third world country where that Social Security check actually is enough to live on, like Cosa Rica or Bulgaria. My goal is to set enough aside to buy a place to live (much cheaper than it would cost here - and no, I haven't been able to afford to buy a house here and am sure I never will) and live on SS when I get there. My husband has this pipe dream that our kids will take care of us and we stay here but I want to sway him away from that line of thinking. I don't want to burden them and I want the greater standard of living a cheaper country could provide.
Apr 28, 2011 11:45AM

To O.B.L.


You say your Social Security is not an entitlement, because you paid for it.  That is the actual definition of an entitlement.  You paid for it, and therefore, you are entitled to it.    An entitlement is the opposite of welfare or a give-away program.  If you do something to earn a benefit (such as pay FICA taxes for years), then you are entitled to that benefit.


Somewhere along the lines, the Republicans have managed to make "entitlement" sound evil, and cause people to believe entitlements will cause the downfall of civilization.  Not so.

Apr 28, 2011 12:00PM
I'm a 59 yr old happily divorced female who plans to stay that way. I've been on disability for a few years now and manage to live well below the poverty level. With various health problems, lung disease (using oxygen, breathing treatments and other meds) and increasingly poor ability to remember even the simple things...there's no chance I'll be able to earn a living again. My income is as follows: $684 per month social security disability, $9 (nine dollars) per month SSI, and $34 (thirty-four dollars) per month food stamps. Thank goodness I do get medicaid to pick up the slack for medicare....otherwise I would not have been able to afford my breast cancer surgery two years ago. My two younger siblings are doing very well in life and I am very pleased for them. My brother works his job while his wife runs the two businesses they own; whereas, my sister's husband works for the railroad while she runs the three Subways they own. The money they earn is their money, and just because I'm their sister, does not mean they are responsible for me. On the off chance that I do have unexpected expenditures, they have always loaned me money to get through the rough patch but they also know that I'll always pay them back when I say I will. My son, more than likely, would try to help me but he is the sole financial support for his family of four. Besides, I would not accept his money anyway because he's my child....not the other way around. When I mentioned to my brother about my eventual passing away that I want our family to cremate me because of the huge expense involved, he reminded me that our family does not believe in cremation and told me not to worry, that I'd be taken care of. (Obviously, this will be the only time I'll accept help from my family....LOL) But, as stated above, I've learned how to adjust (and to economize) and I'm happy.   
Apr 28, 2011 11:03AM
I've been retired since August 2002 and find that as time goes on I spend less and less on many things and we manage nicely. First, you have more time to plan out your spending. We now throw away only about 2% of our groceries. Gas is up, but our trips are very well planned to make less trips to stores. I dumped the HD television and get 12 channels free. It's more than I watch anyway. Retirement without a bucket of money doesn't mean you head for the ledge. 
Apr 28, 2011 9:37AM
Even if you have millions,Uncle Ben will make them worthless soon.
Apr 28, 2011 12:03PM
if your health is good you mite check out living abroad its not for everyone but i live on less than $1.000 a mo. and just a few blocks from the beach we me and my wife have enough money left over to travel etc.just have a open mind its not like living in the USA.
Apr 28, 2011 12:26PM
If you live in a high property tax state such as NJ, the elderly are totally frewed.  Our tiny little house on a tiny little lot on a county road without city water or sewer -- $5K a year.  So having your home paid off and being able to stay in it only applies to states with much lower property taxes, unless you have plenty of money to spare.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.