Even if you’re at mid-career or entering the later years of your career, it’s never too late to save for retirement. But if you’re 50 years old with no retirement savings, you need to make a plan to start saving and investing now.
Let’s look at a few examples of how someone who’s 50 years old with no retirement savings could still retire in comfort — and how to invest your cash for the best possible results.
Start with Social Security
Even if you have $0 saved for retirement so far, it’s important to understand how much retirement income you’re likely to get from Social Security. As of September 2024, the average Social Security benefit for a retired worker was $1,921.56 per month. Social Security replaces about 40% of the average worker’s pre-retirement income.
That’s better than nothing, but not enough money for most people to comfortably pay the bills in retirement. You don’t want retiring to feel like taking a 60% pay cut. This is why most Americans need to invest for retirement. Investing cash from every paycheck with a 401(k) at work is a great way to build wealth, but you can also use other investment accounts.
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How to retire with $0 saved at age 50
Everyone’s retirement planning situation is different, but we’re going to make a few calculations based on the “typical” or “median” American’s personal finances. Let’s say that:
- Your income is $80,610 (the median U.S. household income as of 2023)
- You save 12% of your income for retirement, including any employer match to your 401(k) or other workplace retirement plan. That means $9,673 per year, or $806 per month.
- You invest your retirement savings in a diversified portfolio of mostly stock ETFs, like an S&P 500 index fund.
- Your retirement investments earn an average annual return of 8%. (There’s no guarantee of earning this return, but it’s a reasonable estimate based on past performance of the S&P 500 index.)
- You keep saving this same amount per month and let your savings grow for 17 more years, until you reach age 67.
After 17 years, you’d have $326,432 in your investment portfolio at age 67. If you withdraw 4% of this retirement nest egg money per year as retirement income, that would give you an annual retirement income of $13,057.
But wait: let’s assume you also get 40% of your pre-retirement income from Social Security. You can expect to earn $32,244, which is 40% of that $80,610. Adding those two numbers together gives you a combined annual income in retirement of $45,301.
How much do you need for average retirement income?
Based on your monthly housing costs and healthcare costs, an income of $45,301 per year could be enough for a decent retirement. Many Americans retire without being millionaires; the median income for Americans age 65 and over is $50,290.
If your mortgage is paid off and your monthly bills are low, living on 10% less than the median retirement-age income could be doable.
Bottom line
Even if you’re 50 years old and haven’t saved any money for retirement yet, you might still be able to retire and maintain a decent standard of living. But be prepared to invest enough money so that your retirement savings can help replace more than the 40% of your income that you can expect to get from Social Security. And consider taking action right now to open a brokerage account.
