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Don’t Rely on Social Security for Retirement. How to Start Now, Even With No Savings

I'm 37 and I already have enough saved to retire.

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Bernadette Joy

Kickstarting saving for retirement isn’t always easy. As a millennial money coach, I’ve juggled paying off $300,000 in debt while investing. And even though I now have enough to retire early, the landscape has changed significantly since I made my first 401(k) contribution 15 years ago -- and the retirement savings gap is even wider.

In 2022, approximately 41% of American adults stopped contributing to a retirement fund due to cost-of-living increases, according to a 2023 US News survey. Even more concerning is that nearly a third withdrew from their retirement savings in 2022 to stay afloat.

If you’re feeling overwhelmed or burdened with other financial debt or goals, you’re not alone. Saving for retirement is hard, but with a proactive money plan, ongoing education and the right emotional support, you can take small steps today to help you build toward a respectable future in your golden years. 

Take steps to prepare now, even if you’re not ready to save

Saving enough to enjoy your retirement years is definitely a challenge -- particularly as housing and other essential costs continue to rise while wages fail to keep pace. Many of my own students ages 50 and over have delayed their retirement plans because they simply cannot afford to live on their current savings. Others may have put off contributing to a retirement fund until debt is paid off or their income increases.

In coaching thousands of people to reach their financial goals, the No. 1 regret I hear is that they all wish they started sooner. There will likely never be a “perfect” time. But there are ways to warm up to saving more for retirement without depositing any money. Here’s how I recommend you get started:

  • Open accounts now so they’re available when you’re ready.
  • Use features like “watch lists” to follow investments you’re interested in to learn their trends and nuances over time.
  • Pay down high-interest debt like credit cards to increase your cash flow. Once a debt is paid off, you can divert some of that money toward retirement savings while working on the next debt.
  • Follow money experts like those on the CNET Financial Expert Review Board for practical education and inspiration.
  • Talk to people you know who have successfully retired to remind yourself it’s possible.

The more you arm yourself with financial knowledge, the easier it will be to get started.

Social Security can help, but is rarely enough

If you’re banking on Social Security benefits to carry you through retirement, I urge you to do some research. I learned firsthand that Social Security benefits often don’t stretch far enough. When my parents retired, they relied solely on these benefits to get by. But once my father passed away, we learned that only a portion of his benefits would go toward taking care of my mother. And even with full benefits, Social Security alone is rarely enough to cover medical expenses. My mom struggled with diabetes and a failing kidney, both of which required health care costs beyond what Social Security would cover.

To better plan, figure out how much you’re expected to collect from Social Security when you retire. The maximum monthly benefit for Social Security depends on the age you retire. For example, if you retire in 2024 at:

  • age 62, your maximum benefit would be $2,710
  • full retirement age, your maximum benefit would be $3,822
  • age 70, your maximum benefit would be $4,873

The longer you wait to retire, the larger your benefit. However, if you need to retire earlier due to health or personal reasons, your benefit might not cover much more than housing costs. And with average monthly rent costs hovering around $1,966 as of December 2023, it may be difficult to live on $3,000 per month.

Take advantage of Roth IRAs

Regardless of age, the first place I recommend stashing your retirement funds is in a Roth IRA, or if your employer offers it, the Roth option in your 401(k). About 88% of 401(k) plans offered a Roth account in 2021, almost twice as many as 10 years ago, according to the Plan Sponsor Council of America.

If you’re ready to start saving, there’s still time to make contributions that count toward this tax season. For tax year 2023, you can continue contributing into your IRA until April 15, 2024.

Since you contribute into a Roth IRA with post-tax dollars, when you withdraw funds from a Roth IRA in retirement, you won’t owe taxes on any of the money. But more significantly (and what most people miss), you also won’t pay taxes on the growth earned since your original contributions.

If you contribute $5,000 in a traditional IRA or 401(k) and this grows to $25,000, you will pay taxes on the entire $25,000 when you withdraw. But if you contribute to a Roth 401(k), you won’t pay taxes on the additional $20,000. That’s a huge benefit.

For 2024, you can contribute $7,000 total across all of your IRAs, whether traditional (pretax) or Roth (post-tax), and the limit goes up to $8,000 if you’re age 50 or older. Contributing $7,000 a year may feel like a lot at first, but if you divide that by 365 days in a year, you would need to save $19.18 a day, or roughly $575 a month, to reach the IRS limit. The sooner your start, the more time your money will have to work for you, thanks to the power of compounding interest.

For example, let’s say you start with $0 today and invest $575 monthly to reach the $7,000 IRA maximum. If you continue at this pace for 10 years and earn a 10% interest rate of return, you would have an extra $111,562 to live off in the future.

Roth IRAs do have income limits, though. For 2024, you’re phased out from contributing the full amount if you make more than $146,000 if you’re a single tax filer or $230,000 if you’re married filing jointly. I recommend turning to a traditional IRA if you exceed the income limit to contribute to a Roth IRA. My biggest regret in my own financial journey was not understanding the power of the Roth IRA sooner.

Leverage user-friendly investing tools

Investing used to be much less transparent and a lot more complicated even just a decade ago. We no longer have to settle for the expensive and confusing mutual funds that our parents and grandparents had to choose from. Instead, we can start saving for retirement within a few minutes, thanks to rapidly evolving digital tools and the accessibility of online banking and investment platforms.

I have a 401(k) through my company, and I recently transferred my traditional and Roth IRAs from an antiquated financial services provider to Fidelity, which is more user-friendly and customizable, and comes with education about each investment. But even if you’re not self-employed, check into your company’s investing platform to see what options are available to you. You may be able to take control of where you’re investing your money.

It’s been even more encouraging to see more environmental, social and governance metrics, aka ESG, options available for investors. For example, now you can choose retirement investments based on social or environmental factors such as a company’s carbon emissions, waste-management practices or commitment to employee diversity.

Take advantage of high savings and CD rates

Our current high-rate climate can help you earn a little bit extra as you approach retirement. While a high-yield savings account should not be your primary retirement account, it can serve as a helpful supplement. Having at least one month’s worth of buffer savings in a HYSA can reduce your risk of pulling money out of your retirement fund when times get tough. 

This one month’s buffer should include what it would cost to cover your housing, utilities, transportation, food and health costs, so that you can start moving out of waiting for the next paycheck to pay your bills.

If your risk appetite is not quite robust enough to invest in the stock market, real estate or other alternative investing, I like using certificates of deposit to help me save a little more money now, while reducing the temptation to spend it immediately. 

For example, I decided to put away the amount insured by the Federal Deposit Insurance Corporation into a one-year CD to earn more than 4% for a down payment on a home for this year, which will help me afford a mortgage on a bigger home.

CDs are a great entry point into investing for anyone who’s anxious about losing money. They can help you diversify your overall assets, but you won’t earn as much over time as you would by investing in the stock market.

After you’ve maximized your contributions in tax-advantaged retirement accounts, if you’re ready to invest with a little bit more risk, consider investing with an online platform or robo-advisor to grow your money with index funds, exchange-traded funds and other investment types.

Don’t wait. Your future self will thank you

The sooner you start your retirement savings journey, the faster your money grows. Even if you’re not ready to take the plunge and begin saving just yet, research different retirement accounts and brush up on different savings strategies to make prioritizing your future a little easier.

When you’re ready, plan to make regular contributions to stay on track and grow your retirement savings. That way, you’re in the habit of making contributions and can adjust your budget to accommodate your retirement savings, necessities and other financial goals.

Bernadette Joy is a nationally recognized money expert featured on Good Morning America and NBC News, and in Time and USA Today. She inspires her audience to explore the intersection between net worth and self-worth. While she has two degrees in business and a degree in psychology, her credibility comes from leading by example. As first-generation Filipino Americans, she and her husband AJ paid off a whopping $300,000 of debt in three years and grew their first $1 million of net worth in their thirties. Joy founded Crush Your Money Goals® for the many who are overlooked and underestimated by traditional financial services. Her goal is to help others gain confidence in managing money and provide a blueprint to achieve financial independence.
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