How to retire at 55 with no money?
If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.
- Go through your expenses and look for ways to cut back. ...
- Take advantage of tax-sheltered retirement accounts. ...
- Try to pay off your debts by the time you retire. ...
- See how much you qualify for in Social Security benefits. ...
- Earn additional income. ...
- Tap into home equity.
Many retirees with little to no savings rely solely on Social Security as their main source of income. You can claim Social Security benefits as early as age 62, but your benefit amount will depend on when you start filing for the benefit. You get less than your full benefit if you file before your full retirement age.
How Much Money Do I Need to Retire at 55? On average, you'll need to have saved $1,051,814 to retire at 55 years old. This is based on the median earnings of Americans according to the Bureau of Labor Statistics' October 2023 Current Population Survey in weekly earnings.
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.
This is where the rule of 55 comes in. If you turn 55 (or older) during the calendar year you lose or leave your job, you can begin taking distributions from your 401(k) without paying the early withdrawal penalty. However, you must still pay taxes on your withdrawals.
The earliest age you can start receiving retirement benefits is age 62. If you file for benefits when you reach full retirement age, you will receive full retirement benefits.
If you didn't make saving for retirement a priority early in life, it's not too late to catch up. At age 50, you can start making extra contributions to your tax-sheltered retirement accounts (called catch-up contributions). Younger workers can only contribute $23,000 to their 401(k)s and $7,000 to their IRAs in 2024.
Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
Bottom line: If you want to live on the bare minimum in retirement, you need between $250,000 – $1,700,000 in your retirement portfolio, depending on household size. If you'd rather live off 200% of FPL, then simply double the amount to $500,000 – $3,400,000.
What is a good monthly retirement income?
Average Monthly Retirement Income
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
If you're between 55 and 64, you still have time to boost your retirement savings. Start by increasing your 401(k) or other retirement plan contributions if you aren't already maxed out. Consider whether a bigger pension or a higher Social Security benefit is worth working a little longer.
What Is the Rule of 55? Under the terms of this rule, you can withdraw funds from your current job's 401(k) or 403(b) plan with no 10% tax penalty if you leave that job in or after the year you turn 55. (Qualified public safety workers can start even earlier, at 50.)
But even if you never worked and therefore don't have an earnings record, you're not necessarily out of luck. If you're married (or were married) to someone who's entitled to Social Security, you can collect spousal benefits equal to 50% of your husband or wife's benefits at full retirement age.
You could find some meaningful part-time work in your community, start a business or get a flexible job online. There are also passive income opportunities, including renting out your possessions, pursuing new investments or earning revenue through online courses and podcasts.
Older adults who are aging alone and refraining from social activities and connections can lead to medical complications, depression, and a decrease in function and mobility. They're also more likely to have limited support in times of need and emergencies.
You can get Social Security retirement benefits and work at the same time before your full retirement age. However your benefits will be reduced if you earn more than the yearly earnings limits.
According to the Federal Reserve's 2022 Survey of Consumer Finances, the average 55-year-old American has $537,560 in retirement savings. Given that this average is approximately $1 million short of what's needed to sustain a relatively comfortable lifestyle, the average person would struggle to retire at this age.
If you've worked and paid Social Security taxes for 10 years or more, you'll get a monthly benefit based on that work.
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
At what age is Social Security no longer taxed?
Social Security can potentially be subject to tax regardless of your age. While you may have heard at some point that Social Security is no longer taxable after 70 or some other age, this isn't the case. In reality, Social Security is taxed at any age if your income exceeds a certain level.
According to U.S. Census Bureau data, 50% of women and 47% of men between the ages of 55 and 66 have no retirement savings. O'Connor, who adopted and raised three children as a single mother, said she knew she would be in that group.
It is never too late to start saving money you will use in retirement. However, the older you get, the more constraints, like wanting to retire, or required minimum distributions (RMDs), will limit your options. The good news is, many people have much more time than they think.
You can't realistically retire at age 50 unless you forgo a lot of the traditional spending that comes along with being 20, 30 or even 40. In other words, to reach your goal, you'll have to significantly reduce your discretionary spending now so that you can enjoy that money later.
To get the full special minimum PIA, workers must have at least 30 years of coverage. For 2024, the primary insurance amount for people receiving the Social Security special minimum benefit ranges from $50.90 for someone with 11 years of coverage to $1,066.50 for workers with 30 years of coverage.
