How Millions Retire With Nothing in Savings

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2:24Just go to Indeed.com slash podcast right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash podcast. Terms and conditions apply. Need to hire? This is a job for Indeed Sponsored Jobs. On this episode of the Personal Finance Podcast, we investigate how millions retire with zero in savings.

2:54what's up everybody and welcome to the personal finance podcast i'm your host andrew founder of mastermoney.co and today on the personal finance podcast we're going to be diving into how millions retire with zero savings if you guys have any questions make sure you join the master money newsletter by going to mastermoney.co slash newsletter. And don't forget to follow us on Spotify, Apple Podcasts, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player.

3:29And again, if you want direct help from me, make sure you join Master Money Academy. It'll be linked up down below in the show notes. Now, today we're going to be diving into how millions of Americans are retiring with zero in saving. See, here's what the internet tells you, is that you need a million dollars in order to be able to retire. That is something that we say a lot on this podcast. We talk about you need to figure out what your retirement number is and chase after that number to ensure you have enough money on hand to retire. But there are millions of Americans in this country who are retiring with minimal savings.

4:01Now, you may be thinking of someone right away who you know who retired but doesn't have a lot of money in savings. Maybe it is someone out there like a grandmother who just never had a lot of money and they lived on a fixed income. Maybe it's an uncle, an aunt. Maybe it's a family friend. But you may be thinking of a number of different people who retired in a way where they did not have much saved. Well, I wanna answer the question today, how do they do that? And what can you do to make sure that you actually have money saved so that you can thrive in retirement? See, my entire goal for this podcast is to make sure that you can master your money.

4:35And in order for you to master your money, you need to make sure that you are going to be able to enjoy your retirement. I want you to spend lavishly on things that you love in retirement because you are working so incredibly hard right now. And the last thing I want to see from you is for you to have a dreadful retirement where you don't have much cash on hand. But what are your options if you don't have a lot of cash on hand? And what can you do in retirement if you didn't save much early on? We're going to talk about all of those today in this episode. Now, here's the crazy number that a lot of people don't realize.

5:05is the median American between age 65 to 74 has$200 ,000 in savings. And about one in five Americans over the age of 50 have no retirement savings at all. Now, you as wealth builders who are listening to this podcast or watching this podcast, I want you to make sure that that never happens to you. You're here, you're listening, so that should not happen to you. And roughly 40 % of Americans are only living on social security. And yet we don't have 40 % of Americans living under a bridge. So what is going on and how is this happening? So today we're going to peel back the curtain. What does the typical retiree savings actually look like?

5:43How much income are they actually living on? Because most of us wonder, well, really, how much do they live on and how do they actually get by? The formula that lets people make it work and the trade-offs and risks that I don't want you taking on a lot of these risks because it is very risky to get into retirement and not have enough money saved. And then we're going to talk about the simple game plan to get behind so that you can ensure this does not happen to you. Now, this is an action-packed episode. I am really, really excited for it. So if you're ready, let's get into it. So how common is retiring with little to no savings?

6:18Well, this is something that I want you to picture. You're at a retirement party with 10 different people over the age of 65. Two of them have no retirement savings whatsoever. Two of them literally don't even have retirement savings. This is something I think most people need to note and they need to understand is that there is a larger portion of the country that don't have retirement savings than we actually think. Four of them are completely relying on Social Security. So we're looking at 60 % already that have minimal to no retirement savings. And most of them do not have anything close to a million dollars saved up.

6:53And a big chunk of these people may feel okay day to day, week to week, month to month. But what is happening here is that if one big thing pops up, maybe they need to replace their roof, or maybe they have a big medical bill, this could cause them to spiral financially and put them in a really difficult situation. So let's look at the real numbers, because for ages 65 to 74, the median retirement balance, as we talked about at the top of the show, is$200 ,000. That means half of the people in that age group have less than$200 ,000 in retirement currently. And about one in five people over the age of 50 have no retirement savings whatsoever.

7:28And around 40 % of older Americans rely solely on Social Security for their retirement income. And so we see all these headlines where you need a million dollars, you need two million dollars, you need five million dollars. But the typical retiree right now does not have this. And on average, they really do not have enough cash on hand. This is why Social Security is so incredibly important for a lot of people out there. So let's look at the numbers. And I'm going to give you a couple of different examples of what it could look like as a retiree to see where they land. So first, let's look at a single retiree.

7:59We're going to call this single retiree Linda. And her situation is she has about$200 ,000 in retirement savings currently. And she gets a social security check of about$2 ,000 every single month. So obviously that's$24 ,000 per year. Now, most of us out there, if you lived on$24 ,000 per year, that'd be a very difficult living situation. Now, she follows a simple 5 % withdrawal rate on that$200 ,000, which means she gets an additional$10 ,000 every single year. So in total, she's looking at$34 ,000 per year is what she is living on currently. Now, here's the wild thing. Okay. So Linda has$34 ,000 per year that she can work with.

8:37This is her fixed income that she has to figure out how to get by on. But here's what's wild. The median retiree spends$34 ,000 in a single year. This is how a lot of retirees get by. It's because they are spending a lot less than we actually think they are. That means Linda is basically the perfect picture of the average retiree. She gets$2 ,000 a month at Social Security. She's living on$10 ,000 every single year within her portfolio at that 5 % withdrawal rate, which is a dangerous withdrawal rate, in my opinion. We need to get closer to that 4 % rate, but you can get up to 5%. And now Bill Bangin, who is the founder of the 4 % rule, is arguing that you can actually increase the amount that you are saving every single month.

9:16But let's look at a second example, because I want to look at a married couple. If the median retiree who is single is spending$34 ,000 per year, let's look at a married couple and see where they land. So Bill and Maria are a married couple and they are retirees. So each of them are going to get a$2 ,000 social security check. So that's$4 ,000 every single month. And they also have the same$200 ,000 in retirement. And so because of this, they do a 5 % withdrawal at $10 ,000 every single year. So their total annual income right now is going to be$48 ,000 between the two of them from Social Security.

9:50And in addition, another$10 ,000 from their$200 ,000 saved in retirement. That means they're going to have$58 ,000 every single year. Now, when you compare that to the median household income for 65 plus, which is right around$50 ,000, they are right smack in the middle of that. This is how retirees get by. You have two Social Security checks coming in. That's going to cover a lot of the bills. You have an additional$10 ,000 from your portfolio, and that is how they are getting by. And so a lot of people will ask, well, how do people live off$200 ,000? They're not living on$200 ,000. Instead, they're living off Social Security, and they are withdrawing a small portion of that$200 ,000 every single year, especially if it is invested.

10:28They are trying to preserve that money over this timeframe, and they're keeping their lifestyle very modest. See, if you don't save for retirement, you're going to have a very modest retirement. You're going to have a retirement where you can't do a lot of things because you have a very specific fixed income. So we need to figure out how this is actually going to work. So then that begs the question, well, when do people actually start to claim Social Security? Because there's a range at which you can start to claim Social Security. And a lot of people out there may have a big decision to make.

10:57You'll see a lot of the headlines out there say, oh, wait to claim Social Security until you're age 67. Or if you're really smart, you'll even wait till 70 to maximize the amount that you can get within Social Security. And I love the math on that advice, but guess what? It's not perfect for every single person. In fact, there's a lot of folks out there who need to claim Social Security a lot earlier. And in fact, the median age for folks in retirement is age 62. A lot of surveys show that 60 % of people who retire, they're actually retiring way earlier than they thought. And this is for a number of different reasons.

11:28One is for health issues. Two is for job loss. And three is for caregiving responsibilities. Maybe they have an aging parent, they need to spend all of their time for caregiving or their spouse has a number of different health issues. And so they need to make sure they are caregiving for their spouse. And then fourth is burnout. They just can't do it anymore. They can't go on. And so while the ideal model out there for social security is to claim it a little bit later on, a lot of retirees are claiming it earlier than they thought they would. And so for most folks out there, the backbone to their retirement, the backbone to what they are doing and how they are retiring with no money is social security.

12:06This is how they are getting by. This is their lifeline. This is what they absolutely need in order to be able to do that. And so this is everything else that they have saved up is just the side dish. Social security is what they are living on and how they are doing this. Here's some key stats on this. Roughly half of older adults, at least 50 % of their income comes from social security. And roughly a quarter of retirees rely on it for 90 % or more of their income. Now let's think about this for a second. A quarter of retirees need Social Security for 90 % of their income. You are depending on something that is completely outside of your control.

12:42You have zero control whatsoever on how much of this you are getting. For every single person listening right now, if you are not retired yet and you are working towards retirement, I don't care how old you are, how young you are, you absolutely must make sure that you are saving money for retirement. Otherwise, you are going to be living on a fixed income for the rest of your life that you have zero control over. And the number one thing we want to have with our money is we want to have control over our decisions and we want to have flexibility to do what we want when we want. And that's what retirement is all about, being able to do what we want when we want.

13:16If you rely on Social Security, you will really never have freedom in your life. So you're going to be working for 30, 40, 50 years and you're not going to have freedom. You got to ask your boss to take a day off. You're going to have to go and put in your PTO in order just to be able to go get a doctor's appointment, and then you get to retirement age, you're not gonna be able to spend any money whatsoever because you are living on this fixed income. I do not want that for anybody listening or watching this podcast. I want you to be able to have a thriving retirement. That is what this is all about.

13:46Now, there's been some research that has come out that said around 40 % of older Americans have literally no savings whatsoever. In fact, Social Security is the entire thing. That is their entire plan, and that is how they retire. Remember, the average retired worker benefit right now is about$2 ,000 per month from Social Security. So the average person is getting$2 ,000 per month. That's$24 ,000 per year for each individual person and$48 ,000 per year for a married couple. So when we ask, how do they make it work? They're making it work with Social Security. That is exactly what they're doing and how they're getting by.

14:19But now I want to talk about something even bigger. I want to talk about the difference between income and expenses, because this is where we're going to see how they are actually taking care of some of these expenses. and I want to dive deeper into these so that you can ensure that you have all of these expenses covered before you even hit retirement age. We're going to jump into that next. Now, there are two things that I want you to note when it comes to getting to retirement age. And there are two things that we want you to make sure that you do here before you even reach retirement age. A big one is housing and debt.

14:50Okay. So we're going to talk about housing and debt here and around 80 % of Americans over the age of 65 currently own a home. And so for the baby boomer generation and beyond, a lot of those folks own a home currently and home prices were much more affordable than they are right now. But that did save a lot of baby boomers butts when it came to retirement, because if you had nothing else saved up, at least you had some equity in your home. And if you can get that home paid off, that is going to allow you to reduce your living costs over that timeframe. Whereas folks who do not own a home and they're renting for the rest of their life, they may need some assistance or they may need to figure out a unique living situation, like living with their kids or other things that are going to allow them to be able to afford all of this.

15:30And so because 80 % of Americans own a home after the age of 65, that is helping them tremendously. So here is something that I want you to take away from this is I want you as you approach retirement age to try to become completely debt free, meaning I don't want you to have car payments. I don't want you to have debt on a HELOC. I don't want you to have debt in any other area. And we want you to have your home paid off if you can. The reason for this is because it's just going to reduce that liability. It's going to reduce that stress and it's going to give you more flexibility in retirement.

16:01Imagine a retirement completely debt free where then all you have to worry about is your property taxes, your insurance, maintenance on the home, but you're not going to have to worry about all the costs associated with a mortgage. So instead, you can get rid of that mortgage, that$2 ,000,$3 ,000 per month monthly payment at current times, and then you can then focus your time, energy, and money on things that you actually want to do in retirement so that you don't have to worry so much. Now, this is why a lot of folks take things like a reverse mortgage, which is one of the worst things that you can do out there because they at least have equity in their home and they need the additional income.

16:33But that is not a great decision for most people. And so you need to make sure that you're completely debt free. Plus you have some retirement savings there. So I want all of your debt paid off as you approach retirement age. It's going to make your life so much easier over time. Unless you have a really big retirement account or you have a lot of income coming in. Let's say you have five or 10 million bucks saved up and you're drawing down four to five percent on that five or 10 million dollars, then you may be in a situation where you can look at having a mortgage. But for most of you out there, not carrying a mortgage and being completely debt free is the way to go when you reach retirement.

17:05You do not want to go into retirement with debt because it reduces your flexibility. Also, there are people now who have carried student loans for a long time. So making sure your credit cards are paid off, making sure student loans are paid off, making sure any other of that debt is going to be really, really important. The reality is one third of older households are cost burdened. And so because they are cost burdened, this is because maybe they have debt or they have mortgages and you don't want to have that when you are looking at it. Because if you combine high housing costs with low social security payments, that is not a combination that anybody wants to make sure that they are trying to figure out.

17:40Otherwise, you are going to be living on beans and rice throughout your entire retirement. That is the last thing I want for anybody out there. I want you to thrive in retirement. I want you to enjoy your retirement. Future you needs to get paid. And so you need to make sure that you are saving some extra dollars and putting them towards future you. So if you want to retire with zero savings, let's say you are approaching retirement age right now. You're listening to this podcast episode and you're saying to yourself, well, I don't have a lot saved up. Well, if you want to retire with zero savings or minimal savings, you're going to at least have to become completely debt-free to make it actually work so that you don't go deeper into debt in retirement.

18:13That's one of the number one things that you need to make sure that you are doing. Now, here's an interesting thing. The average retirement household, age 65 plus, spends about$60 ,000 per year. But the median is$34 ,000 per year or$2 ,800 per month. But why is there a huge difference? This is because the averages are getting pulled higher by wealthier people within these equations. And so because of this, the average is going to be completely skewed, whereas the median is a more accurate number when we are talking about retirement spending patterns. And that is why we really care about the median.

18:45when we are looking at all this specific data. Now, here's the interesting thing. The way the retirees spend their money is it typically drops with age. So early on, the highest years of spending for retirees are in their 60s. And then it drops significantly after 75 and 80. Why? Well, a lot of retirees are moving around less. They're traveling a lot less in their 70s and 80s than they were in their 60s. In their 60s, they are still able to move around. They are still able to get to a bunch of different places, whereas a lot of retirees currently in their 70s and 80s will travel a lot less. Now, I think with the fitness revolution that is happening right now, where most people who are younger are getting fit a lot earlier, we're drinking less, we're exercising more, we're eating better.

19:27And so because of this, I think future retirees are going to be able to move around a lot better than current retirees can because they have a longer health span. So there's lifespan and there's health span. Your lifespan is how long you live, how old you are when you die. Your health span is how long can you still do pretty much everything you want to do and be healthy while doing it? And so there's a number of different things. Peter Attia has some great work on this where he talks about lifespan versus health span and why it is so important to make sure that you're focusing your time and energy on your health span.

19:59Because what does the last 10 years of your life look like? If you can't get up and move around, it is not really that great of a retirement. So focusing your time and energy on your health is really, really important. Now, one category that usually goes up later on in life is healthcare. A lot of retirees are spending a lot more on healthcare as time goes on. And so the older they get, the more you're going to spend on healthcare. You just have more health complications. It's just the natural way our bodies work. If you want to finally master your money and build wealth with confidence, then you're going to love Master Money Academy.

20:32This is the membership that I created to give you a step-by-step roadmap to get your financial life completely organized and working for you. So inside Master Money Academy, you're going to get the full roadmap that takes you from zero to financial independence, plus video lessons, worksheets, calculators, deep dive trainings, in addition to weekly coaching calls with me. You're gonna learn how to automate your money, invest long-term, negotiate your salary with no guesswork or overwhelm. And you'll get access to our private community of wealth builders where you can ask questions, get clarity and surround yourself with other people who are building wealth.

21:05One of my favorite parts about Master Money Academy is we have these things called Master Money Masterminds, where it's people who get together who are working on a common goal and they help support each other and they help learn from each other. So if you've been wanting a simple system, a clear plan and support from a community that actually cares, join us inside Master Money Academy. Click the link below to get started at Master Money Academy and I can't wait to meet you inside. Now there is another thing that could be happening with a lot of retirees that I wanna talk about and it is work in retirement.

21:36In fact, data suggests that one in five retirees over the age of 60 are still currently in the workforce. Whereas the headlines are going to say to you, oh, nobody else is working past the age of 65. No, there are a lot of retirees who still either have a part-time job or they are in the workforce. And among those working, there is a huge chunk of them who are working part-time. In fact, a large majority of them are working part-time. And I think that is a good thing. Why? It keeps your mind sharp. It keeps you moving. It gives you a purpose each and every single day. Whereas a lot of retirees, if they go and sit on the recliner for the rest of their life, That is not the way to live.

22:09Instead, if you can earn a little extra income, make your retirement a little bit more enjoyable, have a purpose, keep your mind moving. You're going to live longer. Your health span is going to be better. And it's going to be a way better situation. There are a lot of retirees out there who are doing this. They are working part-time. And maybe there's a number of different jobs out there that you can do. Maybe you're consulting for the industry that you worked in forever. Maybe you're working just a part-time job with something that you enjoy. Maybe you are a starter at a golf course. Maybe you're working as a yoga instructor.