The consequences of not saving enough for retirement can play out in numerous, yet subtle, ways. The results aren’t always disastrous, but they’re almost always sad.
Maybe you have an elderly neighbor who still works a part-time job. Or, perhaps you know someone who moved in with an adult child to afford their bills.
Sometimes, not saving enough for retirement doesn’t spell disaster, but kills dreams instead. Think of everyone you know who wanted to travel the world during retirement, but sits at home watching their pennies instead.
Unfortunately, not having enough money for retirement will be a reality for far too many Americans. Late last year, Andrew Biggs wrote in Forbes that “about 45 percent of working-age households have no retirement savings at all.” Millions of families will still not have enough money, even if you don’t count social security or defined-benefit pensions.
Further, those who are saving may not have enough. A 2016 survey from financial services company PWC showed that 50% of baby boomers had less than $100,000 saved for retirement last year. Unfortunately for baby boomers, their time to save and invest is running out.
If you need any more convincing you should boost your retirement contributions today – or like, yesterday – look around you at the everyday people who no longer have time to change. Or, read these stories from financial advisors who know exactly what happens when you dont save enough:
People all over the world worry about retirement, so you’re not the only one. According to Federal Reserve data, nearly half of U. S. people 50 to 64 years old have saved less than $10,000 for retirement. Yes, that is not enough to support a retirement that could last twenty years.
But before you panic I want you to know that all is not lost. Even if your retirement savings account looks more like a retirement savings piggy bank, there are practical steps you can take right now to improve your situation.
As someone who’s helped many clients navigate this exact problem, I’ll share strategies that actually work – whether you’re in your 50s, approaching retirement age, or already retired with limited savings.
Before Retirement: Your Pre-Retirement Action Plan
Figure Out Exactly What You’ll Need
First things first – you need to create a detailed budget of what your retirement expenses will actually look like Many of my clients are surprised when we sit down and do this exercise
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Create a detailed budget including
- Essential expenses (housing, food, healthcare, utilities)
- Discretionary expenses (travel, hobbies, entertainment)
- Expected healthcare costs (which typically increase as you age)
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Determine your retirement timeline
- When do you want to retire?
- Where will you live during retirement?
- How long might your retirement last? (Consider your family health history)
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Calculate your retirement income sources
- Social Security benefits
- Any pension payments
- Part-time work income
- Other sources of income
Not sure where to start? Try using the AARP Retirement Calculator, which can help determine how much you’ll need to save based on your specific situation.
Maximize Your Income Now
You should make as much money as possible right now. With your retirement clock ticking down, every extra dollar counts!.
Consider these options:
- Take on a side gig or part-time job
- Look for a better-paying position (there are millions of open jobs right now!)
- Sell items you no longer need
- Develop new skills to increase your earning potential
As Jody D’Agostini, a certified financial planner, says: “Now is the period of time you want to maximize your income.”
Pay Down High-Interest Debt
Before throwing money at retirement savings, tackle your high-interest debt first. Credit card debt with 18-24% interest rates will sabotage your savings efforts.
Create a plan to eliminate debt in this order:
- Credit cards and high-interest personal loans
- Auto loans
- Student loans (depending on interest rates)
Build an Emergency Fund
If you save enough for three to six months’ worth of expenses, you won’t have to use your retirement funds to pay for unexpected costs. This safety net is crucial!.
Delay Social Security as Long as Possible
This is one of the best strategies you can use! For every year you wait to claim your Social Security benefits after your full retirement age (up to age 70), you’ll get an extra 8% in benefits.
That means if your full retirement age is 67 and you wait until 70 to claim, your monthly check will be 24% larger – for the rest of your life! This guaranteed increase is hard to beat.
Catch-Up Contributions Are Your Friend
If you’re 50 or older, the IRS allows you to make extra “catch-up” contributions to retirement accounts:
- 401(k)/403(b): Additional $6,500 per year
- IRA: Additional catch-up contribution allowance
Take full advantage of these if you can. Even small additional contributions can grow significantly over time.
Already Retired? Focus on These Strategies
If you’re already retired with limited savings, don’t despair. Here’s how to make the most of what you have:
Master Cash Flow Management
When living primarily on Social Security, careful budgeting becomes essential. Track every dollar and look for areas to trim expenses.
Some practical tips:
- Use budgeting apps to monitor spending
- Eliminate unnecessary subscriptions
- Find senior discounts for everyday expenses
- Consider generic brands and bulk purchasing
- Cook at home more often
Consider Part-Time Work
Many retirees find part-time jobs that are enjoyable and provide supplemental income. This has the dual benefit of keeping you socially active while easing financial pressure.
As Jerry Patterson from Fidelity Investments Life Insurance notes: “A lot of people find a second job they love that helps supplement Social Security and a lack of savings as they enter retirement.”
Look for opportunities that match your interests:
- Retail positions (many retailers offer employee discounts)
- Consulting in your former field
- Pet sitting or house sitting
- School crossing guard or substitute teacher
- Museum or tourist attraction guide
Explore Downsizing Options
Housing is typically one of the largest expenses in retirement. Consider:
- Moving to a smaller home to reduce mortgage/rent, taxes, utilities, and maintenance
- Relocating to a lower cost-of-living area
- Taking in a renter for extra income
- Moving in with family (multi-generational living arrangements are becoming more common)
Investigate a Reverse Mortgage
If you’re 62 or older and have significant equity in your home, a reverse mortgage might be worth exploring. This allows you to convert home equity into income while continuing to live in your home.
How it works:
- The lender pays you (lump sum, monthly payments, or line of credit)
- No repayment required until you sell, move, or die
- You remain responsible for property taxes, insurance, and maintenance
Be aware that reverse mortgages have some downsides:
- Higher interest rates than traditional mortgages
- Fees and closing costs
- Reduces inheritance for heirs
But according to D’Agostini, reverse mortgages have become “much more attractive” since HUD tightened regulations in 2015, making them safer for consumers.
Look Into Tax Credits and Benefits
Don’t leave money on the table! Many retirees don’t realize they qualify for various programs:
- Saver’s Credit: If you’re still working and contributing to retirement accounts
- Property tax exemptions for seniors (varies by location)
- Medicare Savings Programs to help with healthcare costs
- SNAP benefits (food assistance)
- Utility assistance programs
Develop a Written Retirement Strategy
Only 22% of baby boomers have a written retirement strategy, according to Transamerica Center for Retirement Studies. Creating a comprehensive written plan helps you visualize your complete financial picture.
Your plan should include:
- Expected retirement age
- All income sources
- Living expenses
- Government benefits
- Savings and investments
- Inflation considerations
- Longevity planning
- Potential long-term care needs
Expert Help May Be Worth the Investment
Financial planning can be intimidating, especially when resources are limited. But professional guidance might actually save you money in the long run.
Options to consider:
- Fidelity and other brokerages offer one-on-one retirement planning
- Membership plans through The Financial Gym or Ellevest provide affordable access to advisors
- Empower and similar apps offer retirement planning tools
Remember: Your Home is a Retirement Asset
Many retirees forget that their home equity represents a significant asset. As Alicia Munnell, director of the Center for Retirement Research at Boston College, points out: “Households need to recognize that the equity in their home is a retirement asset.”
You can access this equity by:
- Selling and moving to a less expensive home
- Taking out a reverse mortgage
- Home equity line of credit (though this requires monthly payments)
Real Talk: Work Longer If Possible
While not what anyone wants to hear, extending your working years (even part-time) is one of the most effective strategies for addressing insufficient retirement savings.
Working longer provides multiple benefits:
- More time to save
- Fewer years of retirement to fund
- Potential for continued health insurance coverage
- Higher Social Security benefits through delayed claiming
- Mental stimulation and social connections
Think of it as a “phased retirement” rather than working forever. Could you transition to a less demanding role? Work fewer hours? Find work you’re passionate about?
I recently had a client who transitioned from a high-stress corporate job to working 20 hours weekly at a garden center – something she loves – and it’s making a huge difference in her retirement finances.
Start Taking Action Today
The worst thing you can do is nothing. Even small steps make a difference when taken consistently:
- Calculate your expected retirement expenses
- Identify all potential income sources
- Create a detailed budget
- Look for ways to increase income now
- Reduce expenses where possible
- Consider delaying retirement or working part-time
- Seek professional advice if needed
Remember what Catherine Collinson, CEO of Transamerica Center for Retirement Studies, says: “The sooner you get started, the sooner you can chart a course, begin building savings and addressing potential shortfalls and improve your long-term financial security.”
Final Thoughts
Listen, I know this topic brings up a lot of anxiety. Many of us worry we haven’t saved enough. But panicking won’t help – taking action will.
Whether you’ve got 15 years until retirement or you’re already there with limited savings, there are always steps you can take to improve your situation. The key is to be realistic, creative, and proactive.
What questions do you have about catching up on retirement savings? Leave a comment below and I’ll try to address your specific concerns!
#6: Your kids support you in old age.
“I currently have a client whose parents didn’t exactly save much for retirement. When the husband passed away, the widow had no money to her name and very little money coming in from social security.
Because of this, my client had to completely change his life so that his mother could live with them and get help. It’s completely changed their own financial lives and we’ve since had to make adjustments to their retirement plan as well.
Not saving for retirement can bring an extreme burden on your children’s lives and even cause resentment. While my client could afford to take care of his mother and her lifestyle, not everyone else is so lucky. ” – Kansas City Financial Planner Clint Haynes.
#3: You leave your family with financial and emotional stress.
“Tony and his two brothers owned a small family business. Tony had a business that helped support his growing family of six. He planned to sell the business when he retired and live off the money from it. He thought wrong.
Tony had saved very little outside of the business. When a heart attack forced him to retire sooner than planned, Tony did not receive the amount of money he thought he’d get from the company to support he and his wife Mary.
Tony lived the rest of his life puttering around in his workshop and died in peace. After his death . sadly . Even though her children helped her in many ways, including financially, Mary felt the emotional stress of not having enough money and having to deal with financial pressures. ” – Financial Advisor Don Roork of AssetDynamics Wealth Management.
What To Do If You Haven’t Saved Enough For Retirement
FAQ
What happens if you don’t have enough money saved for retirement?
A: If you run out of money in retirement, you may have to rely on Social Security, pensions, or public assistance. You might sell assets or downsize your home. Many turn to part-time work or family support. The impact can be stressful without advance planning.
What is the $1000 a month rule for retirement?
The “$1,000 a month rule for retirement” is a simple guideline to help you estimate the savings needed to generate consistent monthly income in retirement, typically requiring $240,000 in savings for every $1,000 of desired monthly income. This rule, based on a 5% annual withdrawal and 5% annual return, suggests that withdrawing $1,000 a month from a $240,000 portfolio would provide that amount of income without depleting your savings.
Is $5000 a month enough for retirement?
To retire comfortably, many retirees need between $60,000 and $100,000 annually, or $5,000 to $8,300 per month. This varies based on personal financial needs and expenses.
Is 40 too late to start saving for retirement?
Remember: 40 Is Just a Number.
It’s never too late to start saving for retirement!
What should you do if you’re nearing retirement?
Two retirement experts weigh in on what to do if you’re nearing retirement and haven’t saved enough. Experts at Fidelity Investments say that to retire by age 67, you should have 10 times your income saved.
What should I do if I don’t have enough money in retirement?
Figure out how much you’ll need in retirement — then look at ways to get it. Some obvious tactics include saving more and investing more effectively. You might also delay retirement — or consider a reverse mortgage. You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.
Are You putting away enough retirement savings?
An AARP survey revealed that 20% of adults over 50 have no retirement savings at all. Meanwhile, 61% in this age group are worried they won’t have enough to support themselves during retirement. Even among those actively saving, only 40% of men believe they’re putting away enough. CNBC reports that 67% of 55-year-olds fear outliving their savings.
How do I plan my retirement?
Consider when you want to retire, and where. From there, think about the income you’ll live off if there are no savings to speak of. Identify areas to cut costs, with a goal of keeping your monthly expenses as low as possible. If you need help figuring out a budget, try the AARP Retirement Calculator.
Are You way behind on your retirement plan?
You’re not alone if you’re way behind — and there are multiple ways to try to catch up. When you’re getting close to retirement and starting to worry that you haven’t saved enough, you’re not alone. Retiring without enough income or resources is a frightening prospect, and you’re scared.
Do you need financial advice if you want to save for retirement?
If you need assistance or have questions about how to save for retirement, or how much, consider seeking professional advice. Brokerage companies like Fidelity and others offer one-on-one retirement planning, advice and overall coaching to help you reach your financial goals.