Author Topic: Mid life looming - too late to invest?  (Read 2357 times)

Frznrth

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Mid life looming - too late to invest?
« on: September 08, 2018, 09:01:36 AM »
Hi
I'm looking for some advice. 

Here's me.  I'll be 50 next month.  I think this has me looking back and ahead.  I've tried investing in stocks and mutual funds in the past but I didn't have much success.  I used to be very open to risk - too much I guess.  Now I'm not sure what direction I should be headed.

We live in Canada, both work in the public sector and have defined retirement plans waiting for us.  We have no debt, own a nice middle class home and a couple of vehicles.  Kid's education funds are tucked away.  We make decent money ($218,000) together but spend it fairly freely.  No money in any "investments".

I'd love to be able to travel more (we do some now but more is always better), have a nice something to leave the kids, retire earlier than 65 and buy some nicer toys.  Big wish list.

I have 15k that I could invest and could add in around $500 each month.  With my past experience I'm rather risk intolerant but without risk I'm wondering if its too little too late to knock off much of my wish list.  Take my 15k and buy a used convertible so whats left of my hair can blow in the wind or...

Any advice, thoughts, perspective etc - including great deals on a Harley - all much appreciated. 

Thanks for your time. 
« Last Edit: September 08, 2018, 09:36:44 AM by Frznrth »

lhamo

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Re: Mid life looming - too late to invest?
« Reply #1 on: September 08, 2018, 09:39:14 AM »
It's great that you have pensions -- that takes a lot of the pressure off.  But unless you control your spending you are not going to be able to retire early.

If you want more practical/useful input, post the dirty details in a Case Study.  In particular, you/we need a better sense of how your current spending compares to your projected pension amounts at different retirement ages.  Without that info I don't see how we can give you useful advice.

The good news is that at 218k in income, as long as you are willing/able to cap your spending at a reasonable level for a few years it should be pretty easy to build up some additional savings/investments to supplement a smaller pension draw at an earlier age, or help you defer taking the pensions a few years while you live off those savings/investments. 

okits

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Re: Mid life looming - too late to invest?
« Reply #2 on: September 08, 2018, 09:47:07 AM »
I'd love to be able to travel more (we do some now but more is always better), have a nice something to leave the kids, retire earlier than 65 and buy some nicer toys.  Big wish list.

What is your #1 priority?  These wish list items are in conflict with each other and if you already spend everything you make (and save nothing beyond pension contributions) you will definitely not be able to do them all.  Asset accumulation (for early retirement, to leave inheritances for your kids) comes from deferring current consumption (travel, toys). 

Tester

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Re: Mid life looming - too late to invest?
« Reply #3 on: September 08, 2018, 11:18:31 AM »
I am not frugal but I will question the part where you say you could add 500 per month.
With 218000 income you should be able to put aside much more.

On a 120000 I managed to get to 100k in 401k in 3 years ( employee matches 2%).
The rest of my income, around 40-60k/year is mostly untouched for the last 3 years and gets me to almost 250000 net worth.

You need to decide what you want and then take decisions on how to get there.
If you want more money later you must save more now.

Good you have the pensions.

Good luck.

use2betrix

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Re: Mid life looming - too late to invest?
« Reply #4 on: September 08, 2018, 11:33:52 AM »
You need to cut your spending and increase your savings, period.

If you only have 15k to invest and can only save $500/mo, I wouldnít plan on achieving any of your goals in a very substantial measure. Whatís more concerning than those numbers is that you also spend so much youíll need an even larger amount of money put aside.

Iím not sure if your Harley comment was a joke or not. You arenít destined to a life without motorcycles, but all your spending needs to be in check to make them work. I just purchased a brand new Ducati, but Iím also only 30 and saving about $10k/mo. I financed a little over half due to a low interest rate, and my payment/insurance costs what I take home in 3 hours of work. I have also saved nearly 100k this year and I donít make a ton more than you. That is how I justify it.

fuzzy math

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Re: Mid life looming - too late to invest?
« Reply #5 on: September 08, 2018, 03:18:41 PM »
I am not frugal but I will question the part where you say you could add 500 per month.
With 218000 income you should be able to put aside much more.


On a 120000 I managed to get to 100k in 401k in 3 years ( employee matches 2%).
The rest of my income, around 40-60k/year is mostly untouched for the last 3 years and gets me to almost 250000 net worth.

You need to decide what you want and then take decisions on how to get there.
If you want more money later you must save more now.

Good you have the pensions.

Good luck.

Word. You will never be able to retire on your pensions if you are requiring a $218k spend a year...

Laura33

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Re: Mid life looming - too late to invest?
« Reply #6 on: September 08, 2018, 07:11:16 PM »
Youíre going to be 50 next month - congrats, welcome to the club.  That means youíll be 60 in another ten years.  So the real question is what do you want to be posting 10 years from now?  Do you want to be talking about how you had fun with your Harley but now youíre going to have to sell the bike and the house and cut everything to be able to retire in another 5-10 years - or maybe not retire at all?  Or do you want to be sitting here with a couple hundred grand invested and a lifestyle you can comfortably cover with your pensions?

I will repeat what others have said:  if you are ďableĒ to save only $500/month on a $200k+ salary, you are living an unsustainable lifestyle.  You need to be throwing at least 20% of that plush income into investments if you ever want to be able to retire.

When you get to the investments themselves, just find a low-cost broad market index fund, like VTSMX/VTSAX.  But at this point, your problem isnít your choice of investments - itís how little you have to throw at them in the first place. 

Car Jack

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Re: Mid life looming - too late to invest?
« Reply #7 on: September 08, 2018, 07:27:02 PM »

I'd love to be able to travel more (we do some now but more is always better), have a nice something to leave the kids, retire earlier than 65 and buy some nicer toys.  Big wish list.


If you're going to blow all your money on toys, you won't have any to leave for kids or to ever retire.  Time to prioritize.  Set goals.  First goal:  $1M in place for retirement.  No, I'm not kidding.

Awesomeness

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Re: Mid life looming - too late to invest?
« Reply #8 on: September 08, 2018, 07:55:15 PM »
Itís great youíll have pensions and even better if you think you can live within those means. 

This was my thinking years ago but I still managed to put some savings aside for other things.  Big purchases like a roof or car etc. 

So glad I did that because I divorced.  Didnít plan that part. I can live on my settlement but my share of the savings will be my old lady money.  Maybe help me relocate, new roof, big dental bill etc.  Puts me at ease having that chunk of savings.  Iím 47 so itís long term money I hope to never touch but I love that itís there. 

Make sure the other half is protected in case of death.  Iíve got survivor death benefits on the pension but itís 55%. Know all this and social security income for the spouse left behind. 

Also savings is always a good idea. Iíd recommend dialing down that lifestyle so you can accumulate some investments. 

JLee

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Re: Mid life looming - too late to invest?
« Reply #9 on: September 08, 2018, 08:49:15 PM »
I am not frugal but I will question the part where you say you could add 500 per month.
With 218000 income you should be able to put aside much more.

On a 120000 I managed to get to 100k in 401k in 3 years ( employee matches 2%).
The rest of my income, around 40-60k/year is mostly untouched for the last 3 years and gets me to almost 250000 net worth.

You need to decide what you want and then take decisions on how to get there.
If you want more money later you must save more now.

Good you have the pensions.

Good luck.
Presumably market gains constituted the bulk of that?  $18k/yr + 2% is roughly $60k in contributions.

Tester

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Re: Mid life looming - too late to invest?
« Reply #10 on: September 08, 2018, 09:54:17 PM »
I am not frugal but I will question the part where you say you could add 500 per month.
With 218000 income you should be able to put aside much more.

On a 120000 I managed to get to 100k in 401k in 3 years ( employee matches 2%).
The rest of my income, around 40-60k/year is mostly untouched for the last 3 years and gets me to almost 250000 net worth.

You need to decide what you want and then take decisions on how to get there.
If you want more money later you must save more now.

Good you have the pensions.

Good luck.
Presumably market gains constituted the bulk of that?  $18k/yr + 2% is roughly $60k in contributions.

69k added, 25k gains.
Looked again and it is more than 3 years, started in March 2015.

Edit: for the thread starter.
It is not too late.
I started at 37 and now at 40 I am at 240k net worth on an 160k income.
Around 40-60k each year is in RSUs in a company which had a stellar growth so that contributed a lot to the net worth.
As I said I am not frugal enough and we have some expenses which prevent us from saving more.

On your income, with no debt and if you said kids have the school fund done you should be able to save quite some amount in the next 5 years.

The problem is the same as for me- as we started late we need to put much more aside as we don't have the time working on our money to grow them.

Again, good luck with this and I know you can do it.
I hope you will post in 5 years with a 700k savings.
« Last Edit: September 08, 2018, 10:05:05 PM by Tester »

Frznrth

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Re: Mid life looming - too late to invest?
« Reply #11 on: September 09, 2018, 07:56:28 AM »
Hi
Thanks for all the comments.  Does make me think that we could be somewhat more frugal in our spending.  But on the surface we really don't live all that extravagantly.  Our house is nice but not fancy - a 1980's 1200 square foot that I am slowly renovating myself.  My "toys" are an old barely running mustang and an old ski boat (half a ski boat actually - I share it with a friend).  We do take a nice vacation or two every year but nothing crazy expensive.  We spent most of our income paying off the mortgage and saving enough so that our two kids will be able to graduate from college debt free.  But still the money does seem to get spent.  There aren't many costs that I can look at and say wow - that's how I could pack away another 1K a month.  Life is expensive - taxes, gas, food, modest entertainment, some eating out, etc.  But I still get your point and will do some looking.

As long as we both work until our retirement and government pensions will be maxed out we don't have to worry about not having enough to retire on.  I think though my priority would be to save enough to retire a few years before that.   

I get not wasting money but I also get spending to live a life that you enjoy - don't get me wrong - spending money doesn't equate with happiness.  But my father-in-law passed away last month.  Hard working salt of the earth, pinched every penny, saved every receipt sort of guy.  He retired 20 years before passing and spent 95% of it sitting at home watching TV.  No real hobbies or interests - too busy I think working and saving all his life.  His wife now sits in her newly purchased condo with 500K in the bank.  Life lived well?  I don't know. 

Thanks again for the time.  Lots of good things to consider. 

 

fuzzy math

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Re: Mid life looming - too late to invest?
« Reply #12 on: September 09, 2018, 08:22:56 AM »
Seems that both your FIL's frugality and death have you reconsidering your life. You ended up here. Why? Why post? What is it you hope to gain? Those goals you have came from somewhere and on some level you want to make them happen but it seems that you feel your options are to turn into your FIL (who arguably didn't have that exciting of a retirement) or keep spending mindlessly.

You slipped into a line of false thinking, that to make changes you have to eliminate entire $1k chunks of spending at a time. It's a defense mechanism that allows you to say "well I tried and it's just not possible so now I get to do nothing". The reality is that money is fungible and every $20 you save on day to day purchases (or bigger ticket fun items) is $20 that you can put into investments.

Open up your bank statement from July. Find a restaurant charge. See if you can remember what you ordered, or what your family talked about at that meal. Now tell me if that experience still matters to your long term happiness. A huge mindsets shift occurs when you spend enough time here.

Retire-Canada

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Re: Mid life looming - too late to invest?
« Reply #13 on: September 09, 2018, 09:31:20 AM »
Hi
Thanks for all the comments.  Does make me think that we could be somewhat more frugal in our spending.  But on the surface we really don't live all that extravagantly.

I went from ~18% savings [basically RRSP maxing only] to 50%+ savings starting in late-2014 when I found this site. I my 2013 self would have said the exact same thing...for a professional at my age [just about to hit 50] I was not living or spending lavishly. And that statement would have been true. But, once I looked at when and how I would like to retire I realized I was not on a track to be able to make that happen. So either I kept spending like I was and retired later on less or I changed my spending and invested more.

I'm not one to suffer or deprive myself in awful ways to reduce spending. All I did was start with my main spending categories and look for ways to reduce costs without changing the quality of my life. It was easy to drop my monthly spending by hundreds of dollars just by being a little more disciplined and thoughtful with my spending. It took several rounds of going through parts of my life and reducing costs and then living with the new reality for a while. Then going back and optimizing again to get where I am today.

I've more than doubled my savings rate and my lifestyle and enjoyment levels are not different than they were in 2013/14. More importantly my net worth has increased 260% since late-2014 and I am on track to retire somewhere between 50-52. Back in 2014 retirement was some fuzzy goal with an uncertain date and lifestyle. I am by no means living some super frugal barebones lifestyle. I do lots of traveling, I have some expensive sports gear, nice clothes, fancy-ish vehicles, live in a $500K+ house and we drink beer/wine and eat great food.

So what I would say to you is define very clearly what your retirement goals are [when, how much annual spend, what do you want to do, etc...] then plan out how your current situation will play out for those plans with your home equity, pension, CPP & OAS. If everything lines up well and you are headed for the retirement you want than you don't have to do anything at all if you are happy with your current life. OTOH if you won't get to where you want to be for retirement on your current trajectory it's time to make some changes.

I'll just emphasize.."some" changes. You don't have to go nuts on the frugal saver bandwagon [unless you want to]. All you have to do is figure out what it will take to get from your current trajectory for retirement to the one you want. Perhaps you do the math and you would like to be able to spend $500/month more at 65 than your current situation will allow. No problem.

- $500/month x 12 months = $6,000/year
- $6,000/year at 4% withdrawal = $150,000 saved and invested
- starting with that $15,000 you have and saving $500/month in 15yrs at 7% after inflation you'll have around $105,000 at retirement so not quite enough
- starting with that $15,000 you have and saving $750/month in 15yrs at 7% after inflation you'll have around $150,000 at retirement

Now you have a rough plan. You have $500/month already you can save/invest and you have to find $250/month more to reach your target. You'll have to trust us that at a $200K/yr income level you'll be able to save that extra $250/month with nearly no discernible change to your happiness or lifestyle. You don't have to do anything further. Maybe you'll save that $250/yr and think "...Hmmm....that was easy and painless...I wonder what saving an extra $500/month feels/looks like?" And you may start down a road that let's you retire at 60 instead of 65. That's not a bad option to have, but it's totally optional.

The only thing you can't do right now if you are a thoughtful, intelligent, responsible 50 year old adult is not have a clear retirement plan that you are confident will deliver the experience you want.
« Last Edit: September 09, 2018, 09:36:13 AM by Retire-Canada »

Laura33

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Re: Mid life looming - too late to invest?
« Reply #14 on: September 09, 2018, 09:44:29 AM »
I think you have a warped view of what ďextravagantĒ means, at least by this boardís standards.  You gross over $18k/month, youíve been working for decades, and you have $15k savings to show for it.

Honestly, I think you are representative of a lot of people.  Because we have this sense that ďrichĒ means a big house and a big car and lots of toys and private schools and eating out every week and fancy vacations and and and.  So a smaller home, older toys, vacations that donít involve Bali, having to save to pay for school - it all sounds very not-rich.  But the reality is that life is an ďor,Ē not an ďand.Ē  Even a $200k salary doesnít come close to covering all those things - especially when earning that salary requires living in a HCOL area.

Want to know one way or another?  Track your expenses.  Then post a full case study.  I bet you any amount of money that folks here will be able to find more than $1k/month of slack in your budget - without making you feel like you are depriving yourself and your family.

fuzzy math

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Re: Mid life looming - too late to invest?
« Reply #15 on: September 09, 2018, 10:38:30 AM »
Retire Canada had a great point. If you want to increase your spending in retirement by $500 you're going to have to save. What will your pensions provide at this point? It has to be less than $200k. So you can choose to either cut back on spending now so you can spend more later, or you're making the choice to cut back on your spending later because you're unwilling to do so now.

Frznrth

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Re: Mid life looming - too late to invest?
« Reply #16 on: September 09, 2018, 07:43:13 PM »
Thanks - We do need to sit down and get an idea of what a retirement life might look like.  I like Retirement Canada's point that if I don't like what I see for the future then I need to do something about it now.  I've never lived beyond my means but also have never put much emphasis on "investing" for the future.  I'm happy to be debt free with no real worries about the future but true financial freedom seems far off.  Saving 1k a month would be a good start though.  I've never tracked what we spend.  Sounds like a good way to start. 

WalkaboutStache

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Re: Mid life looming - too late to invest?
« Reply #17 on: September 09, 2018, 08:35:05 PM »
The best time to plant a tree is 20 years ago.  The second best time is now.  Don't worry about missed time: if you save and invest now you and your children will still reap rewards.

The internet tells me that this is a Chinese proverb, and the internet is always right (including when it comes to the fact that the Chinese are wise).

catccc

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Re: Mid life looming - too late to invest?
« Reply #18 on: September 09, 2018, 08:48:01 PM »
Maybe there are huge COL differences between OP and I, but my family of 4 spent $57K last year.  And $7K was on travel!  I'm talking 9 extravagant days at Disney for the family, transatlantic flights over the winter holidays for the family, plus Hawaii for a week (from the East Coast) for DH and I.  Transatlantic flights, HI flights, and HI car rental at very minimal cost due to travel hacking, though.  If you are spending most of your $218K you are earning, yet claim to be living a reasonably prudent life and can put aside and extra $500 a month...  IDK, it just seems crazy to me that you aren't able to put away more.

Saving doesn't mean not having hobbies and resigning to a retirement of 95% television.  That's not at all at what I am planning for, and I think most people here are aiming for a lot more than that. 

You definitely need to get a handle on your spending.  There are a couple of ways to do this, IMO.  One way would be to track spending and see where it is going.  From that, create a budget and spend accordingly.  Another way is to just start putting away the savings, and see how your habits adjust.  I would think at your income level, it might happen without much fuss as Retire-Canada suggests!

And ditto walkaboutstache re: that Chinese proverb.  It's one of my faves.  Also, I'm Chinese, and according to walkaboutstache, therefore wise.

Prairie Stash

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Re: Mid life looming - too late to invest?
« Reply #19 on: September 11, 2018, 04:22:34 PM »
Your FIL spent 20 years watching TV, how much do you spend on TV every month? Its meant as a sobering thought, if you think TV is a waste, why spend so much on it (I assume you have cable)?

I suggest pulling out your last credit card statment and cancelling as many recurring items as possible. Its low hanging fruit, most people have a few monthly payments they can cut; the gym membership they never use for example. The next step is to reduce some expenses, cutting bills down requires thoughtful examination of your life, thats a decent process for anyone.

The tough part about reducing TV is what to do with the free time; but that's also the blessing. You'll develop new passions, new interests and new skills. With a little luck you'll spend a little of that time going through your CC statements and looking for the next cut you can make. If you make it a goal to increase savings by $100/month its easily achievable and you won't notice any harships along the way.

Good luck!