How to Retire With No Money
September 25, 2020Retirement Wealth
With lifespans lengthening, financial experts say you should have saved a considerable amount of money for your retirement. But if this isn't possible, you can still retire without money.
While saving for retirement is a smart financial move, it's becoming increasingly difficult for most people. Recent surveys show that approximately 15% of Americans have no savings at all while another 22% have a paltry retirement nest of approximately $5000.
The good news is that you can still retire comfortably without money or savings. And you can manage this by leveraging social security benefits, minimizing your living expenses, paying off your outstanding debts, working in retirement, retiring overseas and securing a pension, among other methods.
Table of contents
Rely on Social Security Benefits
In simple terms, social security is a program that you pay into when you are working and earning. You will then receive a benefit upon retirement. The majority of retirees rely on social security benefits to cover their living expenses.
However, it's important to note that you must meet certain conditions so that you can qualify for social security benefits. For instance, you must have earned 40 credits or at least 10 years of work.
The more you earn and the older you are when you are collecting your benefits, the higher your payouts will be. Therefore, if you want to maximize your social security benefits, it's highly advisable to work until you've passed the legal retirement age which is currently 67.
In 2019, the social security payout was approximately $1,503 per month. As much as this payout may not sound like a lot, you can still manage to eke out a decent and comfortable lifestyle.
On the other hand, if social security payouts are not enough to cover your expenses in retirement, then you will need to find other sources of income or reduce your living expenses.
Minimize Your Living Expenses
As noted above, the amount of money you will receive as social security payouts may not be enough to cover your retirement expenses. If you are in such a situation, it's highly advisable to reduce your living expenses.
Reducing your living expenses or downsizing your lifestyle will go a long way in easing your financial burden in retirement. The good news is that there are numerous approaches that you can use to lower your living expenses during retirement. They include:
- Share Expenses and Space: By the time you retire, there is a high chance that your children will have already moved out of your house. And this means you may be left with more space than you need. If you are living in a large house or home all by yourself, you should consider sub-letting some space or bringing in a roommate.
While this may require you to undertake some changes in your life, you will significantly reduce your bills. For instance, you can approach your family members or friends and inform them of your situation.
Some may be interested to move in with you or even refer you to their friends or someone who is looking for such an arrangement. However, ensure you discuss everything with the renter or roommate before you allow them into your space.
- Retire In a Less Expensive Area: Apart from downsizing your home or sharing your house with someone else, you should also consider retiring in a cheaper place. There are numerous places in the U.S, where the cost of living is affordable.
Some of the affordable places that you can shift to when you retire include Decatur in Alabama, Hot Springs in Arkansas, and Des Moines, in Iowa, just to name a few.
- Retire Abroad: Retiring overseas is also an option for people who want to enjoy a comfortable lifestyle without much money. You can live comfortably on $1000 per month or even less in places like Thailand, Panama, and Ecuador. Also, retiring abroad gives you an opportunity to enjoy your life more during your retirement, as you experience different cultures and environments.
- Lower your transportation costs: Transportation costs can add up quite fast and drain your money in retirement. Fortunately, there are several options that you can pursue to reduce your transportation costs.
First, you should compare public transportation costs versus what you spend driving your car. Depending on your location, you can opt to use public transportation means like light rail, buses, and subway, among others. Some of these options may be cheaper than driving your car.
Second, in case you don't have a car and you can use public transportation, you should consider car-pooling. Platforms like Uber Pool can help you to locate others who may want to share an Uber with you.
As you can see, you have numerous options to consider when it comes to reducing your living expenses. You just need to identify an option that aligns best with your financial situation and personal preferences. And if you decide to shift abroad, you will continue receiving your social security benefits.
Leverage Reverse Mortgage
A reverse mortgage is a type of loan that you can borrow using your home as the loan's security. To qualify for this loan, you must be at least 62 years or older, have sizable home equity that you can borrow against, and have a low mortgage balance. Also, you must be in a position to afford home insurance and property taxes.
If you meet the above conditions, then you can leverage a reverse mortgage to provide you with the cash flow that you need in retirement. You can expect to get a loan of approximately 50% to 75% of your home's value using a reverse mortgage. The maximum payout is usually $625,500.
When you die or leave the home permanently, the home will be resold to off the loan's balance. In case your home doesn't cover the entire amount due, then your bank will pay the difference. On the other hand, if the sale generates more money than the balance due, your beneficiaries will keep the difference.
If you opt to use this approach, make sure you shop around and review the different offers. Different banks offer different interest rates and fees. Therefore, make sure you take your time and consult experts.
Landing a job that comes with a pension plan is not easy these days. But if your organization or company offers a pension plan, then you are guaranteed a monthly income on retirement. And this means you don't need to save any money towards retirement.
Civil servants like police officers, firefighters, teachers, military personnel, and other state and federal personnel are eligible for a pension. Some private companies like Coca-Cola, ExxonMobil, NextEra Energy, NuStar Energy, Southern Company, and Pacific Gas and Electric also offer a pension.
If you are an employee in any of these companies, then you are eligible for a pension. The key to getting a decent pension is by sticking with the same organization or company for a long time. Most employers will give you a pension based on how long you've spent in the organization as well as your compensation during your last few years to retirement.
The longer the period you've spent with the organization, the higher the pension you will receive. If you keep hopping from one job to the other, there is a high chance that your pension will not be as high as someone who has worked with the same company for 20 to 30 years.
If you can manage to pay off your outstanding debts prior to retirement, the pension you will receive should be enough to allow you to enjoy a comfortable life - even without any savings.
Work In Retirement
As much as retirement should be your time to relax and enjoy your life, most Americans are still working even in retirement. A report published by United Income shows that at least 20% of Americans above the age of 65 are still in active employment or looking for work.
Professionals like lawyers, doctors, and accountants usually find it hard to leave behind the life they are accustomed to in retirement. And this explains why some of them continue working even in retirement.
So, if you want to maintain the lifestyle that you had been accustomed to when you retire, you should consider working part-time. When you work part-time, you will be in a position to earn some money that will help you to fund your lifestyle, without having to take loans.
If you are a skilled technician such as a plumber, or electrician, you can continue earning even when you are 70 years and above. Therefore, you will still have some money that will keep you going even in retirement.
Working part-time in retirement will also leave you with ample time to pursue your hobbies and other engagements. As much as you may not earn as much money as you used to before retirement, it will go a long way in helping you supplement your income.
Additional Ways of Retiring with No Money
When you retire, you will continue paying bills and incurring various expenses. Therefore, you need to come up with creative ways of making money. Here are some ideas that you can use to make money in retirement and avoid draining your bank account.
1. Pursue a Hobby that Pays
If you have a skill or passion that you are good at, then you can work part-time or remotely and earn some money - while doing something that you love.
For instance, if you have internet connectivity, you can access a wide range of gigs such as writing, editing, proofreading, and transcribing.
You can also work as an online tutor for students who may require academic assistance. Platforms like RetiredBrains and FlexJobs can help you land some gigs.
If you are a woman who is good with children, then you can also start a daycare and look after your neighbors' kids. Looking after the kids when their parents are away will keep you engaged while making some money on the side. In short, it's a win-win situation.
2. Barter Trade
As much as barter trade may seem like an idea whose time is past, it has been gradually making a comeback. In retirement, you will have some time on your hands, which you can use to provide services for friends or local businesses, in exchange for goods or services.
For instance, you can offer to do some light dusting, clean mirrors, or clean the floors of your local barbershop, in exchange for a weekly or monthly haircut. You can also volunteer at a local urban farm in exchange for fresh produce.
Also, you can offer to walk or look after your neighbor's dog in exchange for a product or service that you cannot afford at the moment. In short, the opportunities are almost endless when it comes to barter trade.
3. Check for Hidden Discounts
You may qualify for savings and discounts depending on the schools you've attended, companies you've worked for, as well as groups you belong to. For example, there are numerous benefits, discounts, and services available to veterans. And this information is readily available.
Pay Off Your Outstanding Debts
If you have outstanding debts, you should find a means of paying them off before you step into retirement. Your outstanding debts will definitely prevent you from living a full and enjoyable life in retirement.
So, how do you go about this process? First, ensure you start paying off the debts that have the highest interest rates. This may be things like your credit card debts. You can negotiate an affordable repayment plan with your credit card company.
Apart from credit card debts, you may also have other outstanding debts like car payments, mortgages, insurance payments for your children and others. You can start paying off your mortgage so that you can eliminate it as fast as possible. In case you can't keep up with your car payments, you can sell it, and buy something cheaper.
It's advisable to consult a financial expert so that they can advise you on how best to repay your debts. And once you get rid of all outstanding debts, your retirement expenses will be lower and you will be in a better position to comfortably retire with no money.
About THE AUTHOR
With multiple family members currently in senior living facilities, David is in the trenches every week, learning the ins and outs of nursing homes, assisted living, memory care, and general senior living.Read more about David Bolton
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We love planning for retirement. It's somewhat of a hobby, and we want to share what we've learned with you. Over the years we've found the best ways to live, how to travel, take on new hobbies and give back. Happiness in retirement is the main goal, and having the right information allows us (and you) to achieve that.
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