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How to Retire in Five Years With No Savings


Who doesn’t dream of retirement? Once you clock out of work for the final time, you can spend more time with family and friends, take up a new hobby or even write your memoirs like you’ve always wanted to. But retirement can seem like an impossible dream, especially for those who haven’t begun saving for it. According to a 2022 analysis from the U.S. Census Bureau, almost half (49%) of adults ages 55 to 66 had no retirement savings at all. That doesn’t have to stop you, though. It won’t be easy and it will require some major lifestyle changes. Below, we’ll walk you through the steps to retire in five years with no savings. A financial advisor can help you plan for retirement.

1. Make a Plan

First, you’ll need to do some in-depth analysis of your spending, future costs and the steps you’ll need to take in the next five years. Here are some of the biggest considerations to take into account as you make a plan:

  • How long will your retirement last? If you’re already in your 60s, you likely won’t need as much money set aside as you would if you’re hoping to retire in your 40s. After all, that’s 20 more years you’ll have to save for!
  • What retirement income will you have access to? If you have a pension, an annuity or qualify for Social Security benefits, you’ll have some money coming in each month, even without retirement savings. Knowing how much guaranteed income you’ll have is vital to making a plan for retirement.
  • What will your spending be like in retirement? Take a look at your current expenses and work from there. While you might save some money by skipping the work commute, your medical expenses (even with Medicare) are likely to go up as you age. However, retirees’ consumption levels do typically drop from their pre-retirement years. As a result, Fidelity says you should plan to spend between 55% and 80% of your pre-retirement income in retirement, depending on your lifestyle and health.

Work out a financial plan for the rest of your life. Obviously, it won’t be perfect, but based on your overall life expectancy, projected retirement income and estimated expenses, you can get a pretty clear idea of how much you’ll need to save over the next five years to retire.

2. Cut Costs

How to Retire in 5 Years With No Savings

To save enough money so you can retire in five years, you’ll need to adopt an extremely frugal lifestyle, probably for the rest of your life. Here are some ways you can reduce your expenses:

  • Downsize your home. Your rent or mortgage payment is likely your largest monthly expense so this is where you’ll be able to save the most money. If you sell your home and buy a smaller, more affordable one, you’ll not only pocket the profit, but you’ll likely save on upkeep and energy bills.
  • Find ways to save on fixed living expenses. Start with your phone plan. You could trade your unlimited data plan for a limited one, or switch to a budget provider. From there, consider selling your car if you have a monthly car payment and making other changes to lower your fixed living expenses.
  • Give up little (or big) luxuries. If you see a personal trainer, get a manicure regularly or go out for fancy dinners, you’ll need to kiss those goodbye. Try working out at home, painting your own nails and trying your hand at homemade dinners.

Unfortunately, if you’re starting from square one, you’re going to have to significantly reduce your expenses both now and for the rest of your retirement. Think long and hard about ways you can save money to sock away for the future.

3. Pay Off or Refinance Debt

Debt isn’t always bad, and sometimes it’s necessary. However, a credit card balance or a car payment can eat into your retirement savings now and in the future. Generally speaking, you can save money by paying off debts early — the longer you carry a balance on your credit card, the more you’re paying in total.

You could also refinance bad debt. If you have a balance on a high-interest credit card, you might be able to transfer it to a low or no-interest card or refinance it with a personal loan. Crunch the numbers first and make sure that any move you make saves you money and allows you to pay off your debt that much faster.

4. Save and Invest

How to Retire in 5 Years With No Savings

This is the most important step. It doesn’t matter how many subscriptions you cancel or luxuries you give up if you’re not putting those dollars in a savings or investment account.

If you have access to a workplace retirement account like a 401(k) or 403(b), you’ll want to make the maximum allowable contribution each year for the next five years. In 2023, the IRS allows you to save up to $22,500 in one of these tax-advantaged accounts, plus an extra $7,500 if you’re 50 or older.

If you don’t have access to an employer-sponsored plan, you’ll want to open an individual retirement account (IRA) and make the maximum contribution of $6,500, plus an additional $1,000 if you’re 50 or older. Contributions to a traditional IRA or 401(k) are tax-deferred, meaning the money isn’t taxed until you start making withdrawals. Money saved in a Roth account, on the other hand, grows tax free because it’s taxed before going in.

Self-control and mindfulness are important skills to hone when making a lot of major lifestyle changes. Remember to look at the big picture before making impulsive purchases and remind yourself that the sacrifices you’re making now are for your future happiness.

5. Enlist an Expert

If this all sounds complicated and difficult, know that you don’t have to do it alone. Consider hiring a financial advisor to help you. A certified financial planner, for example, can help you create a plan for the next five years and beyond. CFPs and other advisors can assist with things like taking advantage of tax savings, choosing savvy investments and creating an actionable budget. While expert financial advice isn’t free, the 1% fee that financial advisors typically charge can be well worth it, especially when dealing with a financial challenge like retiring in a short timeframe with no savings.

Bottom Line

Going from no savings to retiring in five years is no easy task, but it’s certainly not impossible. Remember, cutting your expenses and saving every last penny you can is most important as you look to quickly build a nest egg that will sustain you in retirement.

Retirement Planning Tips

  • Don’t forget to factor Social Security into your retirement plan. Use our Social Security calculator to get an estimate of how much your benefits will be. Keep in mind that claiming at age 62 will reduce your lifetime benefit while deferring Social Security until age 70 will increase it.
  • Retirement planning can be complicated and confusing. Working with a financial advisor can give you clarity and confidence as your prepare. Finding an advisor doesn’t have to be hard. SmartAsset’s financial advisor matching tool makes it easy to connect with professional advisors in your local area. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©, © Kooner, © Kemal Yildirim