I don’t have a retirement fund, now what?

dont have a retirefund fund
I don’t have a retirement fund

Saving and investing to secure yourself a comfortable retirement is one of the most important part of every adults life.

With most experts agreeing that the best time to start putting money away for retirement is in your twenties, time is obviously your best friend.

The unfortunate truth is that most people don’t even consider retirement until they reach their thirties. The most common cause for this is that it is usually not considered to be as important as all the other bills and expenses that we need to keep up with. From student loans, mortgages and everyday expenses – saving money, let alone for your retirement which seems to be so far away, seems impossible for most.

Not surprisingly, a recent study conducted on over 1 million retirement portfolios showed that the maximum contributions were made by people between the ages of 50 and 59 – proving that the average worker only begins to really think about their retirement seriously a few years before the universal ideal retirement age of 65. The other reason that we leave it so late is that most young people who have just entered the job market tend to earn less and have much higher expenses. Whatever the reason that we tend to start late, one thing is for sure – having money set aside for retirement is as important, if not more so, than any other savings you could make. This is because we become less capable of actually working as we age and are vulnerable to getting ill and injured – so without a good amount of savings our lives could be turned upside-down within a matter of weeks.

So what happens when life gets in the way and you simply can’t put away the money you know you need in order to retire comfortably? What happens when you wake up in your mid to late thirties or early forties and have a savings balance of zero – or worse, in the negative? What about if you're in your late forties or early fifties, is there any chance for you to enjoy a comfortable retirement? This is obviously an awful situation for anyone to be in, regardless of your age and income but, not all hope is lost. I have personally seen many people overcome their lack of retirement savings and I believe that with the right attitude and increased financial awareness, anyone can turn things around.

Take Action - Immediately

To prevent the situation from worsening you have to take immediate action. Whether life threw some unexpected curveballs your way or whether you’ve been living paycheck to paycheck – it is crucial that you act right away. You may be thinking “how much worse could it get anyway” but, it can certainly get much worse. If you're struggling to pay your bills right now, imagine what it will be like when you have no income and are unable to continue working. Don’t allow any more time to pass without taking action to ensure you have something to live on in your golden years.

Ditch the debt

If you have a good monthly income and are currently in debt put all your energy into paying these off, starting with the highest interest debts. There is absolutely no logical reason to put money into a savings account when the interest on those savings will be far less than the interest you're paying on your debts. If you have any debt at this stage it is absolutely critical that you pay them off as quickly as possible – you will be defeating the point of saving money for retirement if you’re incurring hefty interest rates from existing debts – so rather allocate all your money to your paying off your debts. Once you’ve ditched these debts you’ll have a lot more money to put away and can start making some obvious progress. The only acceptable time that you should be saving while still in debt is when you're employed at a company that offers a pension fund and matches any contributions you make. We’ll take a close look at this in more detail later on.

Maximize contributions to your 401 (k) or pension fund

The problem with not setting up a 401 (k), or retirement savings account from at least your thirties is that you don’t have the time to allow it to mature or grow. Had you started early, you’d have a significantly larger amount than if you begin in your mid-thirties. How much more? About double the amount by the time you reach 65! If we assume a rate of return of 8% if you started investing at age 25, you would have more than double the retirement savings that someone who started making equal payment at age 35 – and this keeps getting worse and worse as the years pile on. This is the beauty of compound interest and is the reason all these financial experts constantly push people to start early.

If you're still working, regardless of how many years of work you have left in you – you have to start putting money into a savings account but, unfortunately in order to make up for the years of missed savings you will have to allocate every cent you have to it, not just the average recommended amount. If you do currently have a good paying job but have for whatever reason neglected to invest in your retirement you have to ensure that you max out your 401 (k) or pension fund contributions as of your next paycheck.

If your current employer is willing to match your contributions to a 401 (k) then make sure that all the extra money you’ve freed up from lowering expenses (which we’ll look at next) goes to retirement savings account. If you’re working for a company that doesn’t offer this match – it may be time to look for one that does.

Cut down on expenses

Regardless of how old you are or how long you still intend to work – the first thing that you need to do is review your expenses and list them under either needs or wants. The needs are those that are absolutely essential while the wants are obviously those that you can live without. You have to cut out all of the expenses that you consider “wants” – and allocate this money to your retirement fund, there are simply no two ways about this. If you’re spending a lot of money on electronics, entertainment and luxuries, you need to stop. There is no excuse for making these unnecessary expenses when you have no retirement savings – its simply poor money management and I can guarantee that you’ll be regretting for a long time to come. The next step is to review all your expenses and try to find ways of cutting these costs as much as possible. Cut down your electrical bills by being more aware of your usage, look for ways to save on fuel, or downgrade your vehicle to the most fuel efficient available. Switching to a prepaid telephone account will help you reduce you cell phone bills - consider converting as soon as possible. There are many other ways you can cut costs – especially on things such as groceries. You must start purchasing only what you need, looking for special deals and offers and start buying in bulk. These small expenses will add up to a big number over time and if you allocate this to your savings you may be able to put at least a decent amount of money away for your retirement.

Downsize your home

If you own your home it is certainly the only assets that have the potential to remedy your situation. If you live in a considerably expensive house that takes up a lot of your monthly income, such as a mortgage, rent or excessive rates and taxes – it’s time to consider moving. If you own your home, downsizing will free up a chunk of money that you can put towards your retirement fund. In addition it will reduce your monthly expenses and free-up additional cash to put towards your retirement savings. A property is, for many people the only option for funding their retirements and if this is your only option then look for buying a property that is at least 40% “cheaper” than the one you're currently living in. This means a 3 bedroom house could be sold in exchange for a smaller flat or apartment. This may all seem drastic but so is waking up in your late sixties and seventies without a place to live or money to put food on the table.

Social Grants and Social Security Checks

In South Africa – any citizen that lives in the country and is 60 years or older and does not have a combined income of more than R129,360 per year is eligible for an older persons grant but let’s face it this will be insufficient to support you, no matter how low your expenses may be as the maximum payout per month is a mere R1,410.00. There is almost no way that you can rely on government funds in your retirement but I’ve included this here for information purposes. To avoid having to face such a grim retirement you need to act fast and with complete commitment and consistency.

Work Longer

It's quite obvious that since you didn’t start saving early on in life the best way to ensure you can survive is to work longer. This is the unfortunate reality and if you're capable you’ll have to do it. This will give you some extra time to save up but it will also reduce the number of years you’ll have to save for. Many people that have no retirement funds will have to retire much later than the universally accepted age of 65, with many putting retirement off till the age of 75. If you work an extra 5 years, you’ll have 5 extra years to save up and 5 less to save up for – so this is probably one of the most practical ways to overcome a lack of retirement savings.

Look for ways to earn more

If you're not being paid what you believe you deserve with your current employment, there’s no harm in searching for a new job. The key here is to only give notice once you have actually secured another job. Another thing you can do is look for ways to earn additional income. Whether this is by starting a small side business, finding a skill you can use to provide freelance services or taking up a second job – you have to boost your income and ensure that all this cash flow is put into your retirement fund. If we assume that you have at least 10 to 15 years to retirement, you should focus on building income streams as possible – because although you may not have the benefit of compound interest, you can have the benefit of additional income streams. Let’s get a little controversial - assuming that you’ve been in a specific industry for a very long time and considering your age, you should have the experience to start a business. If you have the courage and skill to branch off and start your own business – your earning could seriously be maximized and you’ll certainly have a greater chance of saving up some money for retirement. Starting a business is risky but with a lack of retirement savings, it’s a risk most people are willing to take on. Investing in stocks or bonds could also be an option to boost your income however, since these are considered risky it may be much safer, and at times more profitable to invest any money you have into starting a small side business or even investing in someone else’s business.

The most important thing to do, regardless of your current financial situation, is change your mindset because if you go into this challenge feeling hopeless, you will not succeed. However, if you go into this with a lot of determination and a positive outlook, it will certainly improve your chances of turning the situation around. Rather than feeling sorry for yourself, view it as one last challenge that you have to face and overcome – work hard at it and you will certainly feel a lot more confident and accomplished as the savings start to pile up.


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