What to do if you haven’t saved a dime for retirement

By Jonathan Clements

Here’s a grim statistic: Half of workers age 55 and older have less than $50,000 in savings, according to the Employee Benefit Research Institute’s 2014 Retirement Confidence Survey. 

Some of these folks have traditional defined-benefit pensions, so they’re in better shape than it seems. But most don’t. That means their retirement will be built on modest savings, Social Security and maybe some home equity. 

Does that describe someone you know — or perhaps your own financial situation? If so, how can you retire in at least moderate comfort? My advice: Try mightily to keep pulling in a paycheck until at least age 70, at which point you would claim delayed Social Security retirement benefits. 

Toughing it out in the workforce won’t be easy. Many people are forced to retire earlier than they had hoped to. According to the 2014 Retirement Confidence Survey, workers typically say they expect to retire at age 65 — but it turns out the median retirement age is actually 62. 

Anything that pays
What happens if you get forced out of your job earlier than you’d like? Try to find a job that will cover the bills, so you can put off claiming Social Security. That might mean taking work for which you’re overqualified and that pays less than the job you were forced out of. But collecting some sort of paycheck, so you can delay Social Security, could be the key to a modest retirement. 

Most retirees, of course, don’t delay Social Security. In fact, in 2012, 45% of men and 51% of women claiming Social Security retirement benefits were age 62, the youngest possible age. (These figures ignore those on Social Security disability benefits who were then swapped over to receive retirement benefits.) Claiming at 62 might be the right decision if you and, if married, your spouse are both in poor health. 

But for most folks, it’s likely a mistake, because taking benefits early means accepting a permanently shrunken monthly check. Let’s say your full Social Security retirement age is 66, at which point you could get $1,400 a month, equal to $16,800 a year. This is roughly the average amount that Social Security recipients are entitled to. 

If you claim at 62, you would take a 25% hit, leaving you with $1,050 a month, or $12,600 a year. By contrast, if you delayed benefits from 66 to 70, you would get 32% more. That would mean $1,848 a month, equal to $22,176 a year. This doesn’t reflect any increases because of inflation. 

A good deal
True, $22,176 at age 70 won’t pay for a lavish retirement. But unless you have a lot of other income, you shouldn’t have to pay taxes on your Social Security benefit. Indeed, Social Security is perhaps the best income stream available to retirees. It’s indexed to inflation, backed by the federal government, at least partially tax-free, and you know you’ll get it for as long as you live. Moreover, your spouse may receive your benefit as a survivor benefit, assuming you die first. 

Does waiting until 70 seem too long? If you are married and you were the main breadwinner, you might “file and suspend” once you reach your full Social Security retirement age of 66 or 67. That will allow your husband or wife to claim spousal benefits, so you have some extra money coming in, while you continue to delay your benefit until age 70. 

That spousal benefit can be worth as much as half your benefit as of your full retirement age. For instance, if your full retirement age benefit is $1,400 a month, your spouse could receive $700.
Even as you postpone Social Security, try to save what you can. Also look to slash your cost of living. That might mean trading down to a less-expensive home and making a big push to get all debts paid off before you retire. 

Don’t like the idea of postponing retirement until age 70? Keep in mind that, even at 70, median life expectancy is 15 years for men and 17 years for women, and you could live longer than average. 

A sense of purpose 
Moreover, continuing to work late in life isn’t all bad. We all need a sense of purpose to our lives — which is why many retirees volunteer, take up hobbies, help at local schools and take college courses.
Admittedly, these are things retirees choose to do, while your financial situation is forcing you to work. Still, working until age 70 could give you the social, intellectual and physical stimulation that we all need.


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