Author Topic: Close to retirement age and starting out.  (Read 1749 times)

ChickenStash

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Close to retirement age and starting out.
« on: January 19, 2019, 06:36:18 PM »
I'm asking this for a friend so I don't have all the details but I'm close enough to the situation that I'm being asked for advice and have a rough understating of the situation. Here goes:

Age: 63
Savings: Maybe a few hundred to $1k.
Loans/Debts:
 - $30k in a student loan @ <2% - ~$300/mo payment.
 - $5-7k in CC at unknown but probably near-max interest

Expenses :
 - $575/mo rent
 - $200/mo groceries/toiletries
 - Total of about $1500/mo with everything else - Incomplete data but this should be close.

Assets
 - Car worth ~$8k (4yo, 50k miles, lots of life left), paid off.

Income
- Current: 0 (living off help from her kid, mostly, plus some gov't assistance)
- In a month or so: $3-4k/mo (new job, training pay)
- In 6-9-mos: $5-7k/mo (post-training pay)

Desired retirement age: 67 but willing to keep working on a more limited basis as health permits.
Income in retirement: SS at about $1500/mo, possibly $1900 if her ex-husband passed before her.

Backstory:
She was married for ~30 years and recently split. Neither she or her husband accumulated much wealth so no one walked away from the marriage with much - basically, she kept her car and business while he kept the small house (with mortgage) and his car plus turned over a few $k. Her business wasn't a cash cow but made enough money to survive except it required a ton of hours to maintain without making enough to hire a staff to handle the overhead (finances, scheduling, etc). So, for her sanity and physical health, she shut it down and decided to move on to a normal 9-5 job. Unfortunately, as a 60+y/o, the options are few, even with the unemployment numbers at historic lows.

Fast forward a few months of living off savings and financial help from her kid, she went to school for truck driver training and now has a CDL. The pay during training is listed above as quoted from the HR docs she received from her new employer. The post-training pay is an educated guess based on the industry averages and from others working for the same company. She is mostly "in the door" but has to wait maybe a month or two for a trainer to become available and the training should complete after a few months.

So, where should she go from here? Some thoughts/questions I had are:
 - Pay off the CC debt ASAP. Should be able to easily wipe it in a few months.
 - Expenses might go down a little when on the road due to just not being places to spend money. The trucks all have fridges and microwaves. She doesn't eat junk food so I expect she'll continue to shop for groceries. She'll still need to have a place to live and her current rental is about as inexpensive as it can be for the city without being in a questionable area.
 - With the very low interest rate, does it make sense to pay the student loan ahead of schedule? I'm thinking this fall under the same philosophy as paying a mortgage ahead but I could easily be wrong. Not paying it ahead means she'll still have it when she retires (or goes to part time). When she retires, the payments can be recalculated based on the lower income - term would be extended, though.
 - She'll have more W2 income in this job than at just about any time in her working life so I assume 4 years of higher pay will bump the SS amount up a little which might make things a bit better later.
 - It should be reasonable to get at least $100k saved up before 67. It isn't much and at a 4% withdrawal it's add a little cushion to the SS. 

Obviously, she's not delusional and knows that this isn't great situation but she's hoping that there's a way to at least make retirement survivable on her own. Any advice would be appreciated. 

Laura33

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Re: Close to retirement age and starting out.
« Reply #1 on: January 19, 2019, 07:37:22 PM »
First, she should be able to get an estimate of her SS benefits at various retirement ages.  That is the first thing she should do to understand what she is working with and how much of a delta she may need to make up at different retirement ages.  She should also remember to sign up for Medicare at 65.

Second, she should plan to work until 70 if that is at all possible.  Her SS benefit will grow at about 8% per year after her full retirement age, and since that will be her primary support, she should plan to maximize that as much as possible.  Which means: if she canít physically work until 70, her focus needs to be on having enough savings available to carry her through until then.  Also note:  because she was married for more than 10 years, she should be eligible for the higher of her own or her exís SS benefits.

Third:  yes, get rid of the CC debt as soon as she has some cash available to do so.  I too would let the student loans ride given that rate.  If her future employer has a 401(k) or some other retirement savings plan, she should put as much as possible towards that.

Other than that, she will need to figure out how to keep her expenses low as she adjusts to a very new lifestyle.  It will be important for her to figure out how to eat healthfully and get some exercise while sheís on the road so that she can stay healthy and continue to be able to work and enjoy her life as long as possible.

reeshau

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Re: Close to retirement age and starting out.
« Reply #2 on: January 20, 2019, 02:09:43 AM »
Laura, as usual, has covered all the bases.  But I am also replying to amplify her points about SS and working until 70.  Given your friend's situation, it could really change her retirement lifestyle to wait until SS is maxed.  Or, if her husband made *a lot*, maybe it wouldn't.  But she can find that out now from the SSA.

Given this, also concerned about driving a truck until 70.  While you have made the point that she is taking what is available, this is a job that is notorious for its unhealthy habits.  Eating is one thing, but the job is also to sit all day.  She should also think about how to get sufficient exercise.  In this case, a national gym membership may be in order--whatever it takes not to have this job become a negative for retirement.

Also, what benefits does she get with the job?  Likely, at least a 401k with a match.  Make sure she takes advantage of that.

Cassie

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Re: Close to retirement age and starting out.
« Reply #3 on: January 20, 2019, 11:22:35 AM »
I would stretch that school loan out as long as she can. Her ex doesnít have to die for her to be eligible to collect SS off of his record if itís higher than hers. Plus it doesnít effect what he collects.  Maybe she can continue to drive p.t. once she canít do it f.t.  Yes she should save as much as much as possible.

FreeBear

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Re: Close to retirement age and starting out.
« Reply #4 on: January 23, 2019, 03:31:41 PM »
I agree with the all the other advice that your friend should get SS estimates for every year until 70,  keep w*rking as long as possible, knock out the CC debt (use credit cards as most of emergency fund after paid off), and just pay the min. on the low interest student loan.

Honestly, the biggest problem is that she is completely tied to her new job.  Although is pays well relative to her expenses, she is new to it and it is not certain to "w*rk out".  Even worse, it would be unwise to assume she can get this kind of $$ for as long as she wishes, say to 67 or 70.  It's not like she's in her 20's; bad things happens health and energy-wise.

I strongly recommend that she trim her expenses to match her projected $18K/yr SS (presumably at 67).  Right now she is spending $28K/yr, half of which is "unknown"-not rent, food or student loans.  Maybe it's part credit card debt service, part "stuff".  I've very concerned because of the student loans at age 63 (probably not CDL or driving school!) and thousands in CC debt

If she gets expenses down around $20K-ish after paying off CC's, and if the new j*b pays out, she should save tens of thousands/year.  This is best case.  If she can't pull this kind of money for several more years (yikes!), she still stands a chance living off of SS and maybe part time min. wage once debt is killed and spending under control.  Time to land the plane and get Badassed about LBYM!

She/you can posted detailed expenses.  Prepare for the feeding frenzy!
« Last Edit: January 23, 2019, 03:36:03 PM by FreeBear »

Rosy

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Re: Close to retirement age and starting out.
« Reply #5 on: January 24, 2019, 01:33:12 PM »
Laura wrapped it up with a bow:) I am just adding my 2 cents.
First, she should be able to get an estimate of her SS benefits at various retirement ages. 
Have her sign up online at ssa.gov to establish her own account for easy access and up to date information. That is the first thing she should do to understand what she is working with and how much of a delta she may need to make up at different retirement ages.  She should also remember to sign up for Medicare at 65.
Should be done three months prior to turning 65 - if she misses the 65 birthday deadline she will be penalized and will end up paying 10% extra for Medicare forever.

Second, she should plan to work until 70 if that is at all possible.  Her SS benefit will grow at about 8% per year after her full retirement age, and since that will be her primary support, she should plan to maximize that as much as possible.  Which means: if she canít physically work until 70, her focus needs to be on having enough savings available to carry her through until then

Also note:  because she was married for more than 10 years, she should be eligible for the higher of her own or her exís SS benefits. In other words he does not have to be dead for her to draw under her ex's SS benefit.

Third:  yes, get rid of the CC debt as soon as she has some cash available to do so. I too would let the student loans ride given that rate.  If her future employer has a 401(k) or some other retirement savings plan, she should put as much as possible towards that.

Depending on the interest rate of her cc's and her credit rating - see if it makes sense for her to apply for a zero percent APR card once she is working - so she can transfer her debts and pay them off interest free within the 12 month or sometimes 15 month time frame.
Have her look into Doctorofcredit.com to find a card with a bank bonus - $250 or $300 is extra income and she still has to pay car insurance and cell phone bill, then pad it if she needs to by paying a couple of her son's bills just this once, to reach the required spending limit - usually $500 to $1000.
Also, once she's a bit settled she might switch to a credit card at her local credit union - one with a low interest rate from 9-12 percent, just to have a card that will not kill her with interest when she has extra expenses that she can't immediately pay off.
It isn't huge but my rewards card incl bonus brought me over $700 this year because I had travel expenses - but my normal cc rewards card only about $100 because I just don't spend that much.
What I am trying to say is that particularly when you are low income you need to take advantage of everything, a CU that pays 1% interest for your checking - sure I only made about $60 annually - the thing is it all adds up and that is your life going forward.
 

Other than that, she will need to figure out how to keep her expenses low as she adjusts to a very new lifestyle.  It will be important for her to figure out how to eat healthfully and get some exercise while sheís on the road so that she can stay healthy and continue to be able to work and enjoy her life as long as possible.

Now is a good time to get detailed about the expenses and shut down or lower as much as she can, maybe even do something part time while she is waiting for the next training session. It would be beneficial to have a budget in place once she starts her new job.

Kudos to her for fighting for her Financial Freedom and taking on a new job, especially one like that. It will not be easy, it is tough enough to start a new life on your own after 30 years without envisioning yourself living under a bridge.
From one old lady to another, tell her it can be done and with a bit of good luck, persistence and at least decent health she will be just fine. Having someone in your corner for support will be enormously helpful.

My advice as someone who opted for SS at almost 66 is to go for your current goal of 67 and act as if that is final. A lot can happen in four years - so don't fret too much over how it will all turn out - simply focus on one goal at the time - which is being ready and able to take on this new job.
Working until 70 - pfft, wait and see - you can always opt to take SS at 67 and work part-time or develop your own side gig or if everything works out well work an extra year to 68 - if the company will allow you to.
I know the numbers clearly show the advantages to wait until age 70 for SS, but sometimes that just isn't realistic.

You are not totally out of options. Fix as much as you can of your financial situation now, make it your business to learn - because for you, every financial decision is crucial right now - you want to hone your skills.
Start by looking at your bank - my CU pays 2.5% for holiday club savings up to $4K and you have access any time, so I made it my emergency fund. My other CU offers a starter CD $3K @3.5% but lets you begin with $50 and build up to $3K - 12 month term.

So you know I am not putting my money in .10 interest or even a .50 interest savings account, it ain't much but I can't afford to pass up the opportunity to make an extra $200 for basically nothing.
You know the saying it doesn't matter how much you make, it matters what you do with the money you have.
Good Luck - make the most out of your opportunities and you'll be fine.





ChickenStash

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Re: Close to retirement age and starting out.
« Reply #6 on: January 25, 2019, 10:28:25 AM »
Unfortunately, I spent quite a bit of time drafting a response but the forum ate it when posting. Nice.

Expenses:
I'll see if I can get more detail. I know there's areas to easily cut. She has a land line and cell phone for some reason and the cell is stuck on an old bundle plan left over from her business so that can be trimmed to a single pre-paid plan or similar when the contract expires. Her car insurance is higher than I think it should be - the same as mine and I have more cars that are worth more.

SS:
Can anyone link to an official doc with the details on how she can collect on the ex's SS while he is alive? That seems to conflict with the info she got from the SSA when asking about it awhile back.

Regarding waiting until 70, she has the report with the age breakdown but I don't have the info. If health holds out she's said she doesn't mind working longer but she might just switch to part time at 67 instead of carrying it out. Health is a fickle thing at that point so that's only a question she can answer. Finances will be part of that decision but not all - that's likely to just be a bridge to cross when it appears. Luckily she has family with modest means and they are willing to chip in if needed so she won't be forced under a bridge and eat dog food.

On the plus side, the company found a trainer and she should be driving (and getting paid) the week after next.

Thanks!