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No Money Saved for Retirement? It’s Not Too Late

There are moves you can make to help ensure you get by

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The Voorhes/Gallery Stock

Not everyone facing a retirement shortfall can throw extra money at a 401(k) or IRA. Many people are lucky if they have any money saved at all.

Just how bad is it for the nation’s older adults? According to the Federal Reserve’s most recent Survey of Consumer Finances, nearly half of U.S. households ages 50 to 64 have less than $10,000 in retirement savings accounts. 

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“For these individuals, all is not lost,” says Jerry Patterson, president of Fidelity Investments Life Insurance. “Life in retirement is going to require a lot of focus around budgeting and cash-flow management versus income and savings.”

Knowing you’re short on retirement cash is sure to conjure feelings of fear. After all, retirement can easily last 20-plus years, and $10,000 won’t get you far. But it doesn’t have to keep you up at night. There are moves you can make now to set you up later, and it all starts with creating a plan.

Before retirement

If you’re in your mid-50s and working, now is the time to figure out exactly how much you’ll need in retirement. That means creating a detailed budget that includes every essential and discretionary expense you expect to have as you age.

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. After you answer a series of questions, the calculator will help you determine how much you need to save.

Once you have an idea of how much you’ll need, you can identify ways to shore up your cash. That could mean doing gig work; getting a second, part-time job; considering a career change for a better salary; and selling stuff you no longer need.

“Now is the period of time you want to maximize your income,” says Jody D’Agostini, a certified financial planner and retirement specialist at Equitable Advisors. “There are over 9 million open jobs right now. Maybe it’s time to explore a career change.” The higher your wages, the more money you’ll be able to save.

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For people in their mid- to late 60s contemplating retirement with no savings, delaying that next chapter may make the most sense. Working another year or two, if your health allows, will give you more time to collect a paycheck and improve your financial situation.

While you still have a steady income, focus on paying down your high-interest debt and building an emergency fund that covers three to six months of expenses. After that, you can get busy saving for your retirement. Not sure where to begin? AARP’s This Is Pretirement and Money Map digital tools can help you create a plan.

During this period, try to delay collecting Social Security benefits. The longer you wait, up to age 70, the greater your payout. “The goal is to delay as long as possible,” says D’Agostini. “Those who delay get a credit of 8 percent per year” between their full retirement age and age 70.

Once you’re retired

For people who exit the workforce with limited retirement savings, cash-flow management becomes the main focus, and the main challenge. If you’re relying on Social Security alone, you need to be very smart about how you spend your money. Millions of people do it, but it does require discipline and a willingness to stay on top of your spending and budgeting.

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Retirees can also supplement Social Security benefits by getting a part-time job. Not only can it bring in extra cash, but it provides a way to get out of the house and socialize — things retirees need in their lives. “A lot of people find a second job they love that helps supplement Social Security and a lack of savings as they enter retirement,” Patterson says.

Downsizing may also be in order if you’re struggling to pay your bills and put food on the table. Many retirees want to age in place, but if the mortgage or property taxes are too high or the cost of living in your region is elevated, downsizing to a smaller home or cheaper location could ease some of the pressure. Taking in a renter can also help. After all, housing tends to be one of the bigger monthly outlays. Any way to reduce that frees up more cash to live on.

If you have equity in your home and are 62 or older, a reverse mortgage is another option to consider, but first make sure you understand how it works.

A reverse mortgage is a loan based on the equity in your home. The lender pays you in a lump sum or monthly through a line of credit. The loan doesn’t have to be repaid until you sell the house, move or die. The amount you have used is deducted from the proceeds of the sale. Anything left over goes to you or your heirs.

Reverse mortgages have long had a negative stigma, and there are downsides you’ll need to weigh. The interest rate tends to be higher than on a traditional mortgage, there are fees on top of that, and you are responsible for the property taxes, homeowner’s insurance and maintenance. If you use all the equity in the home, there may be nothing left to leave to your loved ones.

But D’Agostini says reverse mortgages have become “much more attractive” since the U.S. Department of Housing and Urban Development (HUD) tightened regulations on them in 2015. For example, HUD now requires borrowers to undergo a detailed financial assessment to ensure they can meet the terms of the loan. Another rule change enables surviving spouses to remain in the home if a spouse who is listed as the sole borrower dies.

“Tapping your home equity is a viable option if you have less than $10,000,” D’Agostini says.

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