Some people aim to retire with $1 million or more, only to end up failing. But while it’s one thing not to meet your personal retirement savings goal, it’s another to start your retirement years without any savings. And this is precisely the situation in which about 30% of today’s retirees find themselves.
According to a recent investigation per Clever Real Estate, retirees today have an average of $191,659 in savings. But 30% have no savings.
To be fair, Clever surveyed 1,000 current retirees to arrive at its data. This is a very small sample in the big picture of American retirees.
However, this is not the first survey to show that many older people have no savings to fall back on. And it’s problematic for those reasons.
1. Social Security will not be enough
It’s a big myth that old people can live comfortably on social security alone. In reality, these benefits will only replace about 40% of your income if you earn an average salary. But most retirees need 70-80% of their old salary to cover their expenses.
Also, while some people manage to retire with a modest pension, many companies have long since cut them out. If you end up retiring with no savings and are limited to just one Social Security check, you might struggle to pay your bills.
2. The cost of living tends to increase
Seniors on Social Security are eligible for an annual cost of living adjustment, or COLA. But often these increases are not enough to keep pace with inflation.
This year, for example, Social Security recipients got a 5.9% COLA. But recently, inflation was measured at 8.3%. This means that seniors are already losing their purchasing power, despite their most generous social security increase in years.
3. Part-time work may not be possible
Some people assume it’s okay not to save because they can work part-time in retirement to supplement their Social Security income. Although this is a good plan in theory, it may not work well in practice.
You never know if health issues or concerns might prevent you from keeping a job. Look at what happened with the COVID-19 outbreak. Before the introduction of vaccines, running for a job could be dangerous for seniors, and as such many were forced out of their jobs in 2020. You can’t necessarily count on being able to work in retirement, even if you all intend to do so.
Don’t neglect your savings
Retiring without savings is a dangerous move that could cost you dearly, so don’t neglect your savings. Even though you can only save about $100 a month in a 401(k) or IRA, you could grow your balance by a considerable amount if you do it over many years. If not, remember to bring some saving until retirement is much better than entering your senior years without saving at all.