Okay, first off, we are not advocating that you don’t save for retirement. But the cold reality is that most people do not adequately save for retirement. In fact, many people have less than $1,000 in savings. Yet, people seem to find ways to “retire” anyway. Over the years, we’ve seen a lot of creative approaches to retirement, so we thought we’d share some with you.
Before we begin, let’s discuss some fundamentals. In order to successfully retire without savings, you’ll need to find ways to reduce your expenses and line up some sort of regular income. That may seem obvious, but making it happen is the challenge.
In this Part 1, we’ll talk about reducing expenses. Part 2 will cover income.
You Must Eliminate Your Debt to Retire
If you don’t have savings (or even if you do), you really need to eliminate your debt before retiring. It simply makes no sense to be paying on debt when you have no savings and are piecing together a retirement. There are several approaches to eliminating debt, which are discussed here.
But let’s assume you can’t pay the debt and find yourself in a default situation. The good news is you may have much more leverage to negotiate a settlement of the debt for a fraction of the balance without bankruptcy. As you age, and your working years are behind you, creditors recognize this fact and may be more willing to discount the debt.
Also, if you have already quit your job or have low income, it may be much easier to qualify for Chapter 7 bankruptcy, which wipes out most kinds of consumer debt.
Either way, an experienced debt attorney can help develop a custom plan for you to eliminate your debt. Whether it’s through an attorney negotiated debt settlement or bankruptcy, a credible debt attorney can help guide you through this situation.
The bottom line is if you think you can go into retirement without savings and still carrying debt, you’re fooling yourself. The first step should be to consult a debt attorney.
Line up Low Cost Housing
Ideally, you would own your home and have it paid off. In a perfect world, that would go a long way toward reducing your expenses for retirement. But let’s assume you haven’t done this. Other options may include renting with a roommate, moving in with a relative, or exploring assistance programs like Section 8 Housing. We’ve heard of other more extreme measures like living in an RV as you continuously travel the country, but that may not be for everyone.
Another option could include becoming a caregiver for an elderly person. This can have the added bonus of a paycheck in addition to free housing. But you have to be able and willing to do that work. Whatever route you go, the point is you have to find ways to drastically reduce or even eliminate your housing expenses.
Reduce or Contain Healthcare Expenses
Most people in this scenario will need to wait until they are Medicare eligible. You’ll need to be on a government healthcare plan to have a chance at retirement without savings. As you may know, Medicare doesn’t pay 100% of your medical expenses, and it leaves a “gap” of up to 20%. So you will need to get gap insurance or you may need to look into other government programs like Medicaid. Some employers will provide gap insurance after retirement until you die.
Again, the bottom line is you will need to be on some sort of government healthcare plan with little or no money out of your pocket on a monthly basis.
Line up Debt Free Reliable Transportation
You’re going to need some form of transportation to get you to doctor’s appointments, the grocery store, etc. Having a car loan is not doable. So you need to have a car that is paid off, or find another form of transportation. This could include ride share programs, mass transit like buses or light rail. Or, if you don’t need to leave your home much, you might even use a taxi service like Uber. In Arizona, it’s possible to walk or bike most of the year.
Either way, you can’t afford a car payment. In some cases, you may be able to reduce the car debt with the assistance of a debt attorney.
Reducing Costs of Food, Clothing, Utilities & Other Necessities
There are still going to be lots of expenses you can’t avoid completely. We all need food, clothing, utilities and other necessities. You’ll need to do your best to find ways to save and cut costs on these items. Check with your local utility carrier for any assistance programs they may have. Where and how you shop for food and clothing will depend a lot on your personal circumstances. The more dire your situation, the more you’ll need to explore charities and other assistance programs. But many people will be able to make it work just shopping for deals.
There may be other expenses you have that are not mentioned above. But you can apply the same principles of eliminating or reducing wherever possible. And again, you must get out of debt ASAP if you plan to retire.