I lived “adventure”, but now my debts represent half of my savings and we live “hand to mouth” – how can I save for my retirement?

I am a 50 year old mother and wife who have lived a full life as an adventurous young adult. I was brought up in a middle class family. We were a single income family and my dad educated my sister and I well on the importance of saving money. However, I never had more than a meager amount of savings in my 20s and 30s. I traveled with my friends and surrounded myself with modest and bourgeois things.

I spent my 30s living and working in a career in Northern Europe, and my 40s trying to start a new career in the United States. I am now 50 years old and my debts represent half of what I have saved for retirement. I struggled to earn more than I earned when I was in my late twenties.

I’m afraid. Where to start to save? How can I save? My husband, my son and I live hand to mouth.

My dad would be so disappointed in my spending habits. I dropped it and I let myself down. I see no way to improve my retirement savings situation.

Any suggestions beyond paying off my debt (which I already know I should do) would be appreciated.

Thanks,

Jeans

See: I’m pregnant, just lost my job due to COVID, and have $15,000 in a 401(k) – can my husband and I ever retire?

Dear Jenn,

So many Americans realize they don’t have enough for retirement until they’re almost retired, so you’re definitely not alone. I’m sorry you’re in such a difficult situation.

You can’t go back in time, but there are strategies for achieving some kind of comfort in your old age. Much of it will be “block and go,” said Dennis Nolte, financial adviser at Seacoast Investment Services – cutting expenses, using tax-advantaged accounts like 401(k) plans and individual pensions, paying off debts and working longer. The less-than-ideal news is that you’ll probably have to do the latter, even if you weren’t expecting it.

“We’re living longer, and if you don’t have enough money in retirement to have a lot of leisure choices, retirement can be boring,” Nolte said. “Part-time work makes a lot of sense.”

Here’s the hard truth: whatever your idea of ​​retirement — and for most, it’s about leaving the workforce altogether and never looking back — it may not turn out as hoped. .

“Instead of focusing on trying to save enough to stop working altogether, which can be very difficult, if not impossible, for someone her age and income level, she may have to be considering never being able to fully retire,” said Belle Osvath, a financial adviser at VLP Financial Advisors. “Understanding how she can reduce her current expenses and adjust her expectations for her golden years can help bridge the gap.”

Of course, this depends on many factors, including how much you have currently saved, what you plan to spend in retirement, how much of your budget will be allocated to planned and unplanned expenses (such as health care), type of return you would get on those investments, if you received additional retirement income (like Social Security or a pension from you or your spouse), and so on. You don’t have to commit to a retirement-free future just yet, but keep that possibility in mind as you find your way down the path to retirement security.

It doesn’t have to be a “forever” solution either. “Working longer is probably the most effective thing to improve your situation,” said Gage Paul, financial adviser at Western Reserve Capital Management. “By working longer, she has more time to save and pay off her debt. Her savings will also have more time to be invested before she needs them for retirement expenses. Plus, by working longer, she’ll likely spend less time in retirement and have fewer years of expenses that she’ll need her savings to cover. This strategy also allows you to delay when you claim Social Security, so your benefits continue to accrue while you’re in the workforce.

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You mentioned that you struggle to earn more than you did in your twenties. I don’t know what you do for a living, but while trying to find a way to earn more in this real career, have you considered taking a side job? This could be in an established business, or if you have skills you think others could use (carpentry, painting, database entry, editing, etc.), you could start a side job in your spare time. . “It may just start out as a side job that helps pay off debt, but it could also turn into a new career,” said Thomas Rindahl, financial adviser at TruWest Wealth Management Services.

It might not have been the answer you were looking for, but there is no magic solution in this scenario. Besides working longer, there are other basic considerations you could make.

Take a close look at where your money is currently going and try to shift spending, said Vince Clanton, director of Chancellor Wealth Management. “She will have to be critical about where she spends her money, make choices to reduce spending and apply the difference to debt to eliminate it quickly,” he said. “She can then turn to her retirement savings.” That doesn’t necessarily mean cutting all of your expenses, including the ones you treasure – people get a lot of heat for buying coffee to go instead of brewing it at home or subscribing to various streaming providers or entertainment. The goal is to have a balance… do not deprive yourself of all the joys, but reduce to the maximum and especially for things bought without thinking.

Also assess where your money will serve you best. For example, look at the interest rates on your debts and savings accounts. Pay off the debts with the highest interest rates first, try to transfer your savings to an account with a better interest rate, and when investing money for your future, pay close attention to what your returns can be.

A financial advisor can help you understand these spending and debt repayment priorities, as well as create a financial plan that takes into account retirement goals, investment expectations, and other important things. Janice Cackowski, partner at Centry Financial Advisors, said she had a client who was in a similar situation and they had made huge progress – the two set up a savings plan, focusing on this she will have in retirement income and create realistic expectations about when she will retire. “She is well aware that she will have to work, most likely until 68-70, but at least she is on track to be able to retire at some point rather than get away with it,” said she declared.

Also see: I’m 55, I’ve had enough of “crushing jobs”, I’ve invested $1 million badly – can I retire now?

Talk to your husband and maybe even your son about finances, what needs to be done, and the end goal. These conversations can be tough, but having everyone on board to get out of that “hole” can really be the key to walking the right path, and doing so without that feeling of heartache or disappointment.

If you work at a company that offers a retirement plan, such as a 401(k) or 403(b), try to take full advantage of it by contributing as much as possible, but at least up to the employer’s limit. which could be offered. Your husband should do the same. You can both participate in an Individual Retirement Account, although there are eligibility requirements that you should check first. A financial adviser can help you here too.

And finally, maintain a healthy lifestyle, not only to be able to work longer, but also to live well. “A lot of times people are forced into early retirement due to health issues or job loss,” Paul said. “Being forced into early retirement may not be avoidable, but there are things within your control that you can do to try to mitigate that risk.” This list includes avoiding burnout whenever possible, staying relevant with skills in your field, and maintaining a healthy lifestyle.

I know you said you were disappointed with your spending habits, but try to recognize the small upsides. You may not be comfortable with your retirement plans and savings yet, but you’ve also recognized that you need to address this issue. “There’s nothing she can do to change the past,” Paul said. “It’s great to see that she is taking steps to improve her situation.”

Have a question about your own retirement savings or where to live in retirement? Email us at [email protected]

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