Workers are generally advised that they'll need anywhere from 70% to 80% of their ending income on an annual basis to live comfortably in retirement. The logic is that, since most living costs stay the same in retirement and some even go up (like healthcare and leisure), workers need to replace the bulk of their previous paychecks. But data from the Insured Retirement Institute tells us that a large chunk of older workers aren't remotely close to hitting that target, and 45% of baby boomers have zero savings for retirement.

Of course, savings are only one potential source of income in retirement. Other options include Social Security, earnings from part-time work or pension payments from a former employer. The latter, however, isn't something most seniors can count on.

Only 23% of older workers aged 56 to 61 expect to receive pension income, while just 38% of older boomers say the same. And while Social Security can help seniors cover some of their expenses, those benefits are by no means enough to live on.

Senior man with arm around senior woman are both sitting across from someone at a table.


For an average earner, Social Security will replace about 40% of their former income. And while that's not so dire when there are other income sources at play, those without savings or a pension are looking at a pretty bleak picture.

If you're creeping toward retirement with no money to your name, it's crucial that you start saving immediately. Otherwise, you're likely to wind up cash-strapped and miserable at a time in your life when you deserve better.

Making up for lost time

Whether you've been neglecting your savings due to poor money management or because you incorrectly believe you can get by on Social Security, consider this your wake-up call to start doing better. First, examine your budget or create one if you don't have one yet, and identify ways to cut back on spending substantially to free up money to save. That could mean downsizing your living space, giving up a car you can technically live without, or curbing leisure and restaurant meals.

At the same time, you might look at getting a second job on top of your primary one to drum up extra funds for your IRA or 401(k). Of the millions of Americans who are said to hold down a side hustle, 14% do so for the express purpose of being able to build a nest egg.

How much should you aim to save each year? Ideally, as much as you can. If you're 50 or older and have access to a 401(k) plan through work, you can sock away up to $25,000 annually. If you don't have a 401(k), your next best option is to max out an IRA at $7,000 this year but supplement that savings by putting money into a non-retirement account (such as a traditional brokerage account).

From there, it's imperative that you invest your savings for added growth between now and retirement. If you load up on stocks (which you should feel comfortable doing as long as you have a 10-year savings window or longer), there's a good chance your investments will generate an average annual 7% return, which is actually a bit below the market's average. Therefore, if you're able to max out a 401(k) at $25,000 a year for the next 10 years, you'll wind up with $345,000, assuming an average yearly 7% return.

Of course, going from saving nothing to maxing out a 401(k) is a big ask, so let's use a more realistic number -- $800 a month. Save that for 10 years and you'll be sitting on about $133,000 for retirement, assuming that 7% average annual return. It's not a ton of money, but if you save that much and also get on board with working part-time as a senior, you might manage to get by.

One final thing: If you're already in your 50s without much savings, it pays to think about delaying retirement as long as you can. Doing so will give you a few extra years to save, all the while leaving your existing savings untouched for longer. Postponing retirement might also allow you to hold off on claiming Social Security beyond your full retirement age, which means boosting your benefits in the process. And if you're looking at entering retirement without much savings, increasing another income stream is certainly a wise idea.