Help Me Retire: I lived ‘adventurously’ but now my debts equal half my savings and we live ‘hand to mouth’ — how can I save for retirement?

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Hi,

I’m a 50-year-old mom and wife who enjoyed a full life as an adventurous young adult. I was brought up in a middle-class family. We were a one income family and my father educated my sister and I well on how important it was to save 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, middle-class things. 

I spent my 30s living and working in a career in Northern Europe, and my 40s trying to start a new career back in the states. I’m now 50 and my debts add up to half of what I have saved for retirement. I’ve struggled earning more than I earned when I was in my late 20s.

I’m scared. Where do I start to save? How can I save? My husband, son and I are living hand to mouth.

My father would be so disappointed in my spending habits. I have failed him and failed myself. I don’t see any 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,

Jen

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

Dear Jen, 

So many Americans only realize they don’t have enough for retirement until they’re almost at retirement, so you’re certainly not alone. I’m sorry you’re in such a tough predicament though. 

You can’t go back in time, but there are strategies to attain some sort of comfort in your older age. Much of it will be “blocking and tackling,” said Dennis Nolte, a financial adviser at Seacoast Investment Services — trimming expenses, using tax-advantageous accounts like 401(k) plans and individual retirement plans, paying down debts and working longer. The less-than-ideal news is that you’ll probably have to do the latter, even if you didn’t expect you would. 

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

Here’s the hard truth: Whatever your idea of retirement is — and for most, that’s quitting the workforce entirely and never looking back — it may not come to fruition as hoped. 

“Instead of focusing on trying to save enough to stop working completely, which may be very difficult or even impossible for someone at her age and income level, she may need to consider not ever being able to fully retire,” said Belle Osvath, a financial adviser at VLP Financial Advisors. “Understanding how she can lower her current expenses and adjust her expectations for her golden years may help bridge the gap.” 

Of course, this depends on numerous factors, including how much you currently have saved, what you expect to spend in retirement, how much of your budget will be allocated to expected and unexpected expenses (such as health care), what type of return you’d get on those investments, if you would get any 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 future without retirement just yet, but keep that possibility in the back of your head as you find your footing down this path to retirement security. 

It also doesn’t have to be a “forever” fix. “Working longer may likely be the most impactful thing to improve her situation,” said Gage Paul, a financial adviser at Western Reserve Capital Management. “By working longer she has more time to save and pay down her debt. Her savings will also be given a longer time to be invested before she needs them for her expenses in retirement. Also, by working longer she will likely spend less time actually being retired and will have fewer years of spending she will need her savings to cover.” This strategy allows you to delay when you claim Social Security too, so that your benefits continue to accrue as you’re in the workforce. 

Don’t miss: 4 money lessons from 2020 to help you plan for a solid retirement in 2021 

You mentioned you’re struggling to earn more than you did in your 20s. I’m not sure what you do for a living, but while trying to figure out a way to earn more in that actual career, have you considered taking on a side job? It could be at an established company, or if you have any skills you think others could use (carpentry, painting, database entry, copy-editing, etc.), you could start some side work in the off-time. “This may initially just be a side job that helps pay off the debt, but it could also transform into a new career,” said Thomas Rindahl, a financial adviser at TruWest Wealth Management Services. 

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

Look carefully at where your money is currently going and try to shift spending, said Vince Clanton, principal of Chancellor Wealth Management. “She will need to be critical about where she spends her money, make some choices to reduce spending, and apply the difference to the debt to eliminate it fast,” he said. “She can then pivot to her retirement savings.” This doesn’t necessarily mean cutting out every expense you have, including the ones you cherish — people get a lot of heat for buying coffee to-go instead of brewing at home, or having subscriptions to various streaming or entertainment providers. The goal is to have a balance…don’t deprive yourself of every joy, but cut back as much as possible and especially for things mindlessly bought.

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

A financial adviser can help make sense of these spending and debt-paying priorities, as well as create a financial plan that takes into consideration retirement goals, investment expectations and other important components. Janice Cackowski, partner of Centry Financial Advisors, said she has a client who was in a similar situation and they’ve made tremendous progress — the two put together a savings plan, focused on what she will have in retirement income and created realistic expectations about when her retirement will come. “She is well aware that she will have to work, most likely until age 68-70, but at least she is on a path to being able to retire at some point rather than winging it,” she said. 

Also see: I’m 55, tired of ‘soul-crushing jobs,’ have $1 million invested poorly — can I retire now? 

Talk to your husband and maybe even your son as well about the finances, what needs to be done and the end goal. These can be difficult conversations, but having everyone on board to get out of this “hole” can really be the key to walking down the right path, and doing so without that feeling of grief 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 any employer match that may be offered. Your husband should do the same. You can both participate in an individual retirement account, though there are eligibility requirements you should check first. A financial adviser can help you here, too.

And lastly, maintain a healthy lifestyle — not just so that you can work longer, but so that you’re living well too. “Often, people are forced into early retirement due to health issues or job loss,” Paul said. “Being forced into early retirement may not be preventable, but there are things within your control you can do to try and mitigate this risk.” That list includes avoiding burnout whenever possible, staying relevant with the skills in your field and keeping a healthy lifestyle. 

I know you said you’re disappointed in your spending habits, but try to recognize the small silver linings. You may not be comfortable with your retirement plans and savings yet, but you’ve also recognized that you have to fix this problem. “There is nothing she can do to change the past,” Paul said. “It is great to see 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 HelpMeRetire@marketwatch.com

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