I just turned 38 and my husband 44. We do not have a company retirement account, nor an individual one. He is self-employed and my last company had no benefits. My husband collected savings (from previous job) for an emergency years ago. I have $ 15,000 in a retirement account from an old job that I quit years ago and haven’t touched it since.
“’We regret our lack of retirement savings, even though we barely had money to save then. We always had unexpected expenses over the years, in addition to regular bills. ‘”
Dear Late Start Retirement: First, the good news – it’s not too late to start. While the ideal time to start saving for retirement is in your early 20s, just for the perks of compound interest, you still have a long time before you retire – there’s hope! Now for the less than ideal news: You are right to be concerned about your lack of retirement savings. Prioritizing retirement savings is imperative, but it is difficult to do so when you are raising a family, working on a salary, and having to pay daily expenses. Many people struggle with this. You’re not alone. To know whether or not you are really on track, you will need to do a more comprehensive analysis, including how much you expect to need in retirement and what sources of income you will have in retirement, such as personal savings. , a pension and Social Security. There are also many variable factors here. I know you mentioned retiring around age 60 or 65, but you may decide later that you would like to continue working in some capacity at that age, or either of you may have to leave the workforce earlier due to unexpected circumstances. This is where working with a financial advisor could really help you: They will consider all kinds of possibilities, for better and for worse, and will work with you to achieve realistic goals. Truth be told, it can be difficult to reach the goal of retiring at age 60 or 65, at least comfortably. Again, this depends, but it is at least worth acknowledging, as the additional cash flow is limited. For this reason, you may decide to delay your retirement term, even if it’s just a few years, to give yourself a better chance to save. “Waiting to retire has the double benefit of having more time to save and relying on your savings to pay off your income for fewer years,” said Sean Pearson, financial advisor for Ameriprise Financial. “Simply put, the last 15 years of your retirement will cost a lot less than your 25 or more years of retirement, especially if you have more time to save for it.” Still, there are things you can do now to prepare for the future, if you’re not yet ready to make the decision of exactly when to retire (and who is right now?) Have a figure in mind: an ultimate monetary goal – help for multiple purposes, including keeping you accountable on this path to retirement. “It’s very difficult to be motivated by a fuzzy long-term goal,” said Chris Chen, chief executive officer and financial advisor at Insight Financial Strategists. “It is not enough to know that you need to have money for retirement, you need to know how much money you need to save and invest to reach the specific amount you will need at age 65.” Stay-at-home mothers have tough jobs, and it makes sense why you would want to take on this role in the midst of a pandemic and with such high childcare costs. If this is the route you take, have a cash reserve on hand, as you’re not sure when exactly you’ll return to the workforce, said Jennifer Weber, vice president of financial planning at Weber Asset Management. Don’t Miss: I am a 32 year old stay at home mom and my husband makes $ 150,000 a year. Will I ever be able to enjoy a retirement? But then invest some of your money. Weber recommends putting a portion of your savings into an individual retirement account now. The maximum for people under 50 is $ 6,000 per year. There are Roth IRAs, which are funded with after-tax dollars and have tax-free distributions, and traditional IRAs, which are funded with pre-tax dollars, but withdrawals are taxed. (The answer to which is the best depends on your situation and tax brackets now and at the time of distribution; here is more information). To invest in an IRA, you must be generating income, but there is a special rule for married people: If one of the spouses is working, both can contribute to the IRA as long as the compensation and eligibility requirements are met and they file a declaration of joint tax. They are known as “IRA for spouses.” Under this rule, the two of you could contribute a total of $ 12,000 between the two of you a year. There are also retirement plans that your husband can start on his own as a self-employed person. The Internal Revenue Service lists a few options here. Finding the dollars to invest can be difficult, especially given your situation, but finding some money to save will really pay off in the future. For example, if you could save $ 10,000 a year for the next 20 years and increase it at a rate of 5%, you’d have $ 350,000 in savings, said Arthur Ebersole, founder and CEO of Ebersole Financial. “That, along with Social Security, should allow them to retire, especially if they own their home directly,” he said. “It won’t be glamorous and they will have to set expectations as such, but it is achievable.” This, of course, is only doable if you can still afford your home, utilities, food, child care, health care, and other necessities. See also: I’m a 31-year-old engineer who wants to switch to a lower paying job one day. What rate of return do I need to maintain my retirement savings? Here’s what else you should be working on in the meantime if retirement savings are a priority for you – keep your expenses as low as possible without depriving yourself. First, make sure your expenses are below your income, Chen said. Then try to put them below your income minus your savings needs. Also be strategic, said Michelle Buonincontri, financial adviser at New Direction Financial Strategies. Get together as a couple from time to time to go over your budget and household expenses and come up with a method to “get ahead” of unexpected and random expenses, she said. “I love using bundles for multiple savings goals, as it creates clarity and accountability by ‘deciding’ to transfer from those spending accounts, rather than swiping a debit card and wondering what happened at the end of the month,” he said. Automate your savings too, Buonincontri said. After reviewing your monthly finances, including carefully studying your credit card and recent bank statements to see how money is coming in and going out, try dedicating a portion of your income to your retirement savings goals before even letting it go. actually lands on your account, where it is you are most likely to see and spend it. You have a solid foundation, the advisers said. He has no consumer debt, he paid off his student loans, said Dennis Nolte, financial adviser for Seacoast Investment Services. You have a car loan and a mortgage, but that also means you have a home equity. You have a sizeable emergency fund and understand why you are where you are on your retirement savings journey. Choosing to stay home to care for children is not just an economic decision, but also a quality of life decision. So I’ll end this and hope you keep that in mind: “retirement” is a loose term these days. It’s not what it was 20 years ago, when you expected to leave it at 65 and move to the beach. People are completely redefining this phase of life, as well as the path to it. You may decide later in life that you really don’t want to go back to work anymore, or you and your husband may want to take up a hobby to make money or a side job that will give you additional cash flow in “retirement.” “There are many ways to manage your career and family choices,” Pearson said. There are many ways to manage ‘retirement’ ”. Questions about your own retirement savings or where to live in retirement? Email us at HelpMeRetire@marketwatch.com