Here's What Happens When You Retire With No Savings

Saving for retirement is not easy. After all, how are you supposed to carve out money for retirement savings when you have pressing bills, like a car and mortgage payment, to make?

But if you don't manage to bring any savings into retirement, you may need to live on Social Security alone. And that could easily result in a cash-strapped existence.

You'll likely need more income than what your benefits provide

It's a big myth that Social Security will fully replace the paycheck you were collecting before retirement. If you're an average earner, Social Security will only replace about 40% of your former income. So if you retire without any savings, you might end up effectively taking a 60% pay cut.

At the start of 2023, the average Social Security benefit was $1,827 a month. That's an annual income of a little less than $22,000.

Now, think about your expected bills in retirement. Even if you own your home in full and you're able to shed other expenses related to holding down a job, you'll still need to maintain your home, pay for utilities, fuel up your car, and eat. And a monthly income of $1,827 may not cover your basic expenses in full.

Of course, your monthly Social Security benefit might be higher than $1,827. The point, however, is that if you retire without savings, you might struggle a lot. And you might land in a situation where you're forced to cut back on pretty much every single luxury because you can't afford any extras.

Don't put yourself in a tough spot

Retiring without savings could make you miserable at a time in your life when you deserve to enjoy yourself. So rather than run that risk, prioritize your retirement savings, even if you have to start slowly.

One smart bet is to automate the process of saving for retirement so you know your nest egg is getting funded every month. If you have a 401(k) plan through work, you can sign up to have contributions deducted from your paychecks automatically. Otherwise, you can find an IRA with an automatic savings option and do something similar -- arrange for a portion of each paycheck to land in that account off the bat.

And remember, too, that you don't need to part with tons of money to build up a nice amount of savings over time. Let's say you're 25 and want to end your career at 65. Over the past 50 years, the stock market has delivered an average annual return of 10%, as measured by the S&P 500. So if you go heavy on stocks in your retirement account, you might enjoy a similar return.

In that case, if you sock away $100 a month over 40 years, you'll contribute a total of $48,000 and will end up with about $531,000. That could easily spell the difference between living comfortably and struggling.

Retiring with no savings could make your senior years downright miserable. Do what you can to avoid that fate, because your older self deserves better.