Author Topic: Late in life saver  (Read 1001 times)

Roadrunner53

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Late in life saver
« on: June 12, 2018, 09:24:58 AM »
This post is about a man I know. He is a great guy and was a stay at home Dad. He and his wife separated and live separate lives. The guy stayed home till he was in his mid 40's then returned to work. They each contributed to two of their children's college educations. They went to expensive schools.

The guy has a 401k but I don't think much saved and may have a little savings but not even a blip on the radar screen to think of retiring. He is around 55 years old now.

My question is it possible when working at an average paying job, living in an apartment, to save enough in 10-15 years to retire? Are there any strategies a person could take to make it happen?

The only thing I can think of is buying a cheap condo and rent it out. Maybe in 10 years the condo could be paid off and it could be used as rental income in retirement. Or buying a duplex and live in one half.

I find it horrifying to think this person will have so little savings and the only check coming in will be a Social Security check. Not even close to covering expenses.

Has anyone experienced this and pulled it together in a short time frame? If it were me, I would get a second job and save that money.


ixtap

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Re: Late in life saver
« Reply #1 on: June 12, 2018, 09:39:54 AM »
I only spent about ten years actually working in my middling salary career and have more than the average bear in retirement funds. It just takes focus and frugality.

Ask him to calculate his SS at FRA and work out what kind of lifestyle he could have if that were his entire budget. The closer he can get to that now, the more he can save. Or, it might jolt him into looking to increase his income.

Sibley

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Re: Late in life saver
« Reply #2 on: June 12, 2018, 09:50:19 AM »
Realistically? He won't have as much saved. He doesn't have the advantage of decades of compounding. However, he made choices earlier in his life, and there are consequences to those choices. If he's able to get a good job, live frugally, save a lot, and perhaps work longer, he should be ok.

Roadrunner, I understand that you may be horrified - but the guy made decisions that financially were not optimal. He has to live with that, along with millions of other people. If he's really only living on SS income, then his lifestyle will be drastically simplified.

Laserjet3051

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Re: Late in life saver
« Reply #3 on: June 12, 2018, 10:13:21 AM »
I'm a late in life saver. There's still a lot one can do. Learning to live (and be happy/comfortable) on less is a big part of the overall strategy. A second one is to eliminate all debt going into retirement. These two combined, can profoundly impact retirement quality, irrespective of how small the asset base is.

frugaliknowit

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Re: Late in life saver
« Reply #4 on: June 12, 2018, 10:19:23 AM »
There's really not enough information in your post.

You say you think he has a 401K, but doubt there's much in it...? 

He needs to start by:

1.  Estimate expenses in retirement.
2.  Estimate his SS income via the statement from SS.
3.  Subtract #2 from #1.  This is his shortfall, we will call "SH"
4.  Figure out how much of his current 401k or other savings, will cover SH.
5.  Estimate how much he needs to save per month (more?) to make up the difference.   Cut expenses/increase income as necessary.

Roadrunner53

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Re: Late in life saver
« Reply #5 on: June 12, 2018, 11:17:13 AM »
I know this guy is just one of many who have not saved or have hit hard times. A lot just don't think about the end of the road when it comes to working. All of a sudden they either get sick and can't work, get laid off and can't find a job or are offered a meager package to go. Or just kept working and squandering money.

Another person I know moved to another state and bought a house. Took a few months off enjoying the new surroundings then started hunting for work. It was during the last recession and there were no jobs to be found. They had to dip into savings until that ran out. Then could no longer pay the mortgage. Eventually, went into foreclosure and car was repoed. It was a terrible time but they finally found a minimum wage job that barely pays the bills. This was a person that made very good money at one time. I tried to convince the person to get a job driving a school bus but nope, wouldn't think of it. I would rather do something I hated than lose my home!

I am a different breed. When it comes to money I have worked at jobs I hated for years, worked OT at those jobs for the extra money. Hated every minute of it but my bank account liked it very much. Eventually got better jobs but still there were aspects of them that I hated but kept chugging along.

Zamboni

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Re: Late in life saver
« Reply #6 on: June 12, 2018, 11:48:33 AM »
Since this thread is all doom and gloom so far, I'm going to play Devil's advocate: 10-15 years is plenty of time to grow a healthy nest egg for retirement.

What I think is necessary:
1. Track all outflows of money religiously for 3 months. Use YNAB, excel, or pencil & paper . . . . but count every penny that goes out for anything.
2. Optimize: look for opportunities to eliminate expenses. Eat out only once a month as a special treat (and make that cheap), no cable, find the cheapest phone plan, reduce insurance expenses, reduce commute length, etc.
(3. Obviously, eliminate any debt as fast as possible.)
4. MAX out any employer sponsored retirement options available. This is no brainer. Max the "catch up" contributions. That is why they exist!
5. Open up a Roth IRA and max that as well.
6. Large assets should be sold and the money invested (ie, get rid of any expensive car or expensive house if it involves a loan . . . or maybe even if it doesn't involve a loan.)
7. For the next decade, continue tracking expenses and optimizing with the goal of living on as little money as possible right now. Utilize money saving strategies like finding a roommate, if possible. For inspiration, look at Jacob's website: http://earlyretirementextreme.com/
8. Delay taking social security for as long as possible . . . the amount of the check goes up each year after 62. When friends start drawing it, resist the temptation.
9. Plan to keep working as long as health allows it.
10. Retire quite comfortably at 70.

Back to reality, for whatever reason most people can't even get through steps 1 & 2. If he can't do those basic things, then it will seem impossible to do steps 4 & 5. It is the burn rate in steps 1 & 2 that prevent most people from saving enough for retirement . . .

Roadrunner53

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Re: Late in life saver
« Reply #7 on: June 12, 2018, 12:14:13 PM »
Since this thread is all doom and gloom so far, I'm going to play Devil's advocate: 10-15 years is plenty of time to grow a healthy nest egg for retirement.

What I think is necessary:
1. Track all outflows of money religiously for 3 months. Use YNAB, excel, or pencil & paper . . . . but count every penny that goes out for anything.
2. Optimize: look for opportunities to eliminate expenses. Eat out only once a month as a special treat (and make that cheap), no cable, find the cheapest phone plan, reduce insurance expenses, reduce commute length, etc.
(3. Obviously, eliminate any debt as fast as possible.)
4. MAX out any employer sponsored retirement options available. This is no brainer. Max the "catch up" contributions. That is why they exist!
5. Open up a Roth IRA and max that as well.
6. Large assets should be sold and the money invested (ie, get rid of any expensive car or expensive house if it involves a loan . . . or maybe even if it doesn't involve a loan.)
7. For the next decade, continue tracking expenses and optimizing with the goal of living on as little money as possible right now. Utilize money saving strategies like finding a roommate, if possible. For inspiration, look at Jacob's website: http://earlyretirementextreme.com/
8. Delay taking social security for as long as possible . . . the amount of the check goes up each year after 62. When friends start drawing it, resist the temptation.
9. Plan to keep working as long as health allows it.
10. Retire quite comfortably at 70.

Back to reality, for whatever reason most people can't even get through steps 1 & 2. If he can't do those basic things, then it will seem impossible to do steps 4 & 5. It is the burn rate in steps 1 & 2 that prevent most people from saving enough for retirement . . .

Zamboni, all very helpful suggestions. Thank you.

terran

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Re: Late in life saver
« Reply #8 on: June 12, 2018, 12:26:09 PM »
Since this thread is all doom and gloom so far, I'm going to play Devil's advocate: 10-15 years is plenty of time to grow a healthy nest egg for retirement.

Right, isn't this the entire point of this whole forum? There are the high earners doing it in less time, but if you can't save enough to live off of in 15 years you're doing something wrong (like most of the rest of the people in the country) or have some extra disadvantage working against you (huge preexisting debt, a literal disability, etc).

Zamboni

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Re: Late in life saver
« Reply #9 on: June 12, 2018, 01:19:21 PM »
^Yes, absolutely true. 15 years is a long timeframe.

The challenge is getting people to change behavior.

I have someone I love dearly, someone who listens to what I say, who has a lot of trouble changing behavior around money. Instead of getting frustrated, it is just easier to understand that this is normal. We (on this forum) are the abnormal. Over several years, I have helped this person make substantial progress on retirement savings rate by the gentle approach: up the 401K % contributed every year around annual raise time.

Did I go from very small contribution to maxing my retirement accounts overnight? Yes
Will most people be able to handle what their paycheck looks like the next month? No

OP is writing about someone who is 55. The time for the gentle glide into upping retirement savings has passed, but indeed 15 years is plenty of time for becoming FI.

formerlydivorcedmom

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Re: Late in life saver
« Reply #10 on: June 13, 2018, 08:47:05 AM »
My mother-in-law was in a similar situation.  She was a SAHM; when the youngest child went to college, her husband left and she was on her own at age 50.  He got the retirement funds; she got the paid-for home (~150k).

She got a job as a teacher at a parochial school (which means she never made much money).  She saved the max in her 403b, including catch-up amount, which means she lived on a pittance for years.    During that time, a hurricane ripped the roof off her house, destroying pretty much everything she owned.  Insurance rebuilt the house, but in the meantime she lived in a borrowed travel trailer in her front yard for months.

She retired at 63 and claimed Social Security.  With that and her savings, she has more money available now than she did before.

I'm really proud of her.  She changed her life dramatically in a short amount of time in order to meet her new goals.  She lived a very Mustachian lifestyle and achieved a comfortable retirement.

It was all on her, though.  We sat down with her and went through her finances and various scenarios in the beginning, and she decided what steps she would take.  We just cheered her on.

Roadrunner53

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Re: Late in life saver
« Reply #11 on: June 13, 2018, 08:51:21 AM »
My mother-in-law was in a similar situation.  She was a SAHM; when the youngest child went to college, her husband left and she was on her own at age 50.  He got the retirement funds; she got the paid-for home (~150k).

She got a job as a teacher at a parochial school (which means she never made much money).  She saved the max in her 403b, including catch-up amount, which means she lived on a pittance for years.    During that time, a hurricane ripped the roof off her house, destroying pretty much everything she owned.  Insurance rebuilt the house, but in the meantime she lived in a borrowed travel trailer in her front yard for months.

She retired at 63 and claimed Social Security.  With that and her savings, she has more money available now than she did before.

I'm really proud of her.  She changed her life dramatically in a short amount of time in order to meet her new goals.  She lived a very Mustachian lifestyle and achieved a comfortable retirement.

It was all on her, though.  We sat down with her and went through her finances and various scenarios in the beginning, and she decided what steps she would take.  We just cheered her on.

Great story! So many people just don't change their ways and end up penniless. Your mother is a success story for sure!

SunnyDays

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Re: Late in life saver
« Reply #12 on: June 13, 2018, 11:20:18 AM »
If his wife worked while he stayed at home with the kid(s), wouldn't he qualify for alimony and/or part of her pension, if she had one?

terran

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Re: Late in life saver
« Reply #13 on: June 13, 2018, 11:34:03 AM »
If his wife worked while he stayed at home with the kid(s), wouldn't he qualify for alimony and/or part of her pension, if she had one?

That's a good point. Even without these (subject to whatever agreement they reached during the divorce), if he was married at least 10 years and hasn't remarried he would be eligible to collect spousal benefits (1/2 of her benefit) if that's more than what he would get based on his record. https://www.ssa.gov/planners/retire/divspouse.html