Retirement without saving possible, for a few people

Tina Haapala |


By Gary Silverman, CFP®

Today we are wrapping up a little series about whether you can do fine in retirement even if you are not saving anything. This came up because studies have shown that most Americans aren’t saving enough for retirement and about a third of them aren’t saving anything.

Last week we looked at the two main components of retirement planning: How much it costs to live, and what income you are going to have in retirement to pay for it. That second part was divided into guaranteed income source (someone with deep pockets promising to pay you) and non-guaranteed sources (which mostly are one form of investing or another).

The simple mathematics are clear. If you want to ignore the saving and investing stuff while you are working then you need to make sure your guaranteed income is at least as big as your retirement spending.

One of my former clients lived in the style he wanted to, and traveled quite a lot. While he did have a pool of investments and continued to save and invest all the way through retirement, he never needed to touch them. His guaranteed income sources, Social Security and pensions, were more than enough to pay for the lifestyle he wanted. So even if he had never saved for retirement, he would have been fine.

So yes, it is quite possible for you to completely ignore retirement saving and investing and still have a nice retirement.

But there are caveats: First, you have to actually run the numbers. Second, your numbers have to take into account inflation. The third caveat: both have to have some semblance of accuracy.

That first one, running the numbers, may seem obvious. But as I’ve said many times, the number 1 method people use to determine if they can afford to retire is guessing.

The second, inflation, is often overlooked. If you have an $80,000 per year pension and $80,000 in expenses you are likely in trouble. Most pensions have zero inflation adjustments to them. Expenses do not have this limitation. A modest 3% inflation rate means that 10 years after you retire you’ll still be bringing in $80,000 a year but it will cost $108,000 to live. I think you can see the problem.

Then there’s accuracy. People regularly forget to add in the little things in their retirement costs such as car replacement, Medicare supplement insurance, trips to see the grandkids (for some reason the kids themselves aren’t a big draw), and sometimes even groceries.

Accuracy also includes determining what is guaranteed. Those in the early 1980s who assumed that 10-year CD rates were guaranteed to be well over 10% were a bit surprised when they were up for renewal in the early ‘90s at only 3%.  Mortgage borrowers who knew they could easily refinance a balloon payment they took out in 2006 found out that the banks weren’t interested in cooperating in 2009.

But to answer the question of this series: Properly planned and executed, you can live a life where having saved nothing will not harm your ability to live a comfortable retirement. It’s just that realistically most can’t.

Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing