Life Without Retirement Savings

Recently, The Atlantic published a tremendously powerful article by Alana Semuels entitled This Is What Life Without Retirement Savings Looks Like, which is well worth reading for anyone who is hedging their bets on the question of whether to save for retirement at all or whether to save more for retirement.

It opens with the story of Roberta Gordon:

Roberta Gordon never thought she’d still be alive at age 76. She definitely didn’t think she’d still be working. But every Saturday, she goes down to the local grocery store and hands out samples, earning $50 a day, because she needs the money.

“I’m a working woman again,” she told me, in the common room of the senior apartment complex where she now lives, here in California’s Inland Empire. Gordon has worked dozens of odd jobs throughout her life—as a house cleaner, a home health aide, a telemarketer, a librarian, a fundraiser—but at many times in her life, she didn’t have a steady job that paid into Social Security. She didn’t receive a pension. And she definitely wasn’t making enough to put aside money for retirement.

So now, at 76, she earns $915 a month through Social Security and through Supplemental Security Income, or SSI, a program for low-income seniors. Her rent, which she has had to cover solo since her roommate died in August, is $1,040 a month. She’s been taking on credit-card debt to cover the gap, and to pay for utilities, food, and other essentials. She often goes to a church food bank for supplies.

This isn’t just Roberta’s problem, either:

Many Americans are finding themselves without enough money to retire

More and more older people are finding themselves in a similar situation as Baby Boomers reach retirement age without enough savings and as housing costs and medical expenses rise; for instance, a woman in her 80s is paying on average $8,400 in out-of-pocket medical expenses each year, even if she’s covered by Medicare. Many people reaching retirement age don’t have the pensions that lots of workers in previous generations did, and often have not put enough money into their 401(k)s to live off of; the median savings in a 401(k) plan for people between the ages of 55 and 64 is currently just $15,000, according to the National Institute on Retirement Security, a nonprofit. Other workers did not have access to a retirement plan through their employer.

That means that as people reach their mid-60s, they either have to dramatically curtail their spending or keep working to survive. “This will be the first time that we have a lot of people who find themselves downwardly mobile as they grow older,” Diane Oakley, the executive director of the National Institute on Retirement Security, told me. “They’re going to go from being near poor to poor.”

Three pillars of the U.S. retirement-savings system

This is what the system is like today, and it won’t get better going forward:

The retirement-savings system in the United States has three pillars: Social Security, employer-sponsored pensions or retirement-savings plans, and individual savings. But with the rise of less stable jobs and the decline of pensions, a larger share of older Americans are relying only on Social Security, without either of the two other pillars to contribute to their finances. This by definition means they have less money than they did when they were working: Social Security replaces only about 40 percent of an average wage earner’s income when they retire, while financial advisors say that retirees need at least 70 percent of their pre-retirement earnings to live comfortably.

The recession and economic trends in the years since have also worsened the finances of millions of seniors. Some bought homes during the housing boom and then found they owed more on their homes than they were worth, and had to walk away. Others invested in the stock market and saw their investments shrink dramatically. Jackie Matthews, now 76, lost her investments during the recession, and then had to sell her Arizona home in a short sale, netting only $3,000. She now lives near her family in Southern California, renting a room in a friend’s apartment, and budgets her finances carefully, skimping on meat and never buying anything new.

But even people who emerged from the recession relatively unscathed may have a hard time saving, according to a 2017 report from Government Accountability Office. Average wages, when adjusted for inflation, have remained near where they were in the 1970s, which makes it hard for workers to increase their savings. This has had a significant impact on the bottom 80 percent of workers, for whom average wages have remained relatively constant, even as income increased for the top 20 percent of households in the past three decades.

Much of the article goes on to describe various political methods for solving this problem for people who are in this state now, but for me, this article really shouts out to the people who are well under retirement age, the people who are making the decision right now whether or not to save for retirement.

I want you step back for a moment and think of yourself in the shoes of an elderly person that you know and love. If you can’t think of anyone, think of Roberta.

Imagine that your body doesn’t work as well as it does right now. You can’t move as quickly. You injure easily. You get tired easily. You’ve still got plenty of life in you, but you’re older.

Now, imagine that you either have to put in a full hard day of work each day – probably at a different job that pays lower wages and puts some demands on you – or you have to live on far less than minimum wage. Your choice.

In that situation, remember, you’re older. You’ve already worked for many, many years, and your body is a little worn out. It’s hard to do it.

That’s the future you most likely have for yourself if you don’t save for retirement. It’s basically unavoidable. Social Security can’t provide enough for you to live comfortably on in your old age, not on its own. It can provide enough to barely scrape by, but that’s it.

Now, imagine the alternative. Imagine you did save for the future.

You don’t have to work at that job. Sure, you can work at a simpler job of your choosing if it’s something you enjoy, but you’re not forced up against the wall to have to work a hard full time job just to eat.

You don’t have to push yourself hard in your later years. You can actually enjoy them. You can rest when you need to, and have adventures when you want to, and know that you have the resources to be able to do both.

Right now, as you sit at 25 or 30 or 35 or 40 years old, you’re making that decision for your future self, the version of yourself that will exist thirty or forty years from now. That will be you. There is no magic that will keep it from happening eventually.

The question you must ask yourself is this: are the most frivolous things in my life right now worth a huge improvement in my life later on? Are things like going out for lunch with coworkers every day or buying more and more hobby supplies or putting unnecessary yard decorations up worth having that kind of life challenge down the road?

The thing to remember is this: when you choose to save for retirement, you’re giving up the least important expenses in your life right now in order to have a much better life in retirement. You’re giving up leather seats in your car for cloth seats. You’re giving up a meal at a high-end restaurant in exchange for a meal at a medium-level restaurant. You’re buying store brand hand soap instead of name brand hand soap. You’re having people over instead of going out to somewhere forgettable. You’re making a few energy improvements to your home instead of just forgetting about it.

Those are very minor changes in terms of the quality of your life today. They’re almost inconsequential. Yet, those changes add up to enough to enable you to fund your 401(k) at work at a healthy level, or to start feeding a Roth IRA. Lock onto those things and keep feeding them until it’s time to retire and guess what? You’ll actually be able to retire. And by retire, I mean you’ll have control over what you do with your time during those later years. You can choose to rest if you want to. You can choose to work on your own terms because it’s not done out of pure financial need. You’re free.

Investing in the stock market

Another route that could help you to avoid facing retirement without savings is investing this “spare” money into the stock market. The daily ups and downs of the market may make the idea of investing in stocks seem a bit scary. But over the long-term, history shows that the stock market has delivered an average annual return of 7%, when accounting for inflation, dividends and other factors. Setting a fixed budget and schedule for purchasing stocks and keeping them for 10 years or more can result in a substantial growth in your investment from increases in value and number of shares you own, in addition to quarterly dividends paid out and possibly reinvested.

Many people are turning to online brokerages like Robinhood to get started investing in the stock market. Robinhood enables you to open and fund an account that you can use to directly place orders to buys and sell shares of stock all from your laptop or mobile device. You can also research companies, build lists, get customized notifications, and soon be able to purchase fractional shares of expensive stocks without paying the whole price. You could send the money you’re saving monthly on cut-back expenses into your Robinhood account and let it accumulate until you have enough to buy the shares you want or invest in fractional shares monthly to reach a goal over time.

Because you’re aiming to avoid facing retirement without savings, your goal is to grow the amount you invest in the stock market over time. In addition to building a strategy that steadily increases the number of shares you own, you’ll also want to monitor how your stocks are performing, remembering that highs and lows in the market are generally temporary. You’ll also want to focus on building a diverse portfolio of stocks in companies that pay dividends you can use to buy more shares and have a high likelihood of stability for the next few decades.

That choice is up to you, and you start making that choice right now. Not tomorrow, not next year, now. If you sign up for retirement savings right now, you’ll have the maximum power of compound interest behind you, a power that fades with every year that passes. If you start now, you can save less and get the same results than if you waited a few years. The impact on your day-to-day life will never be less than it is now if your goal is to have a nice retirement.

What are you going to do about it?

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

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  • Courtney Mihocik
    Courtney Mihocik
    Loans Editor

    Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to,, and elsewhere.