Last week on the post Over 50 – No Pension, No 401(k) – What Now?, Ted left a comment that got to the heart of what that post is all about:
“I am 60. Lost my primary home through foreclosure . Just filed bankruptcy. Have been a full time realtor for 20 years . Crash of 2008 took me down. Now starting over. I do have college degree, health is good.
I still have an income property with no equity and it needs work. I do hustle with side jobs, real estate is coming up. Don‘t really want to retire.
Can I still get back on track? Thank you . God bless everyone. Ted”
I started writing a response to Ted’s question, but quickly realized that it was morphing into a full-blown post. I’ve also been aware for a very long time that Ted is hardly in this boat alone. There are quite literally millions of people in this situation, and for more reasons than we can imagine. With Ted’s permission, I’m providing my response through this post (Thank you for giving me this opportunity Ted!).
I claim no status as a retirement expert (if there even is such a person) but here is a multi-step action plan that I believe will help Ted and others facing similar circumstances.
Attitude and outlook
You’re going to be around people who will be living the full retirement life, so you’ll need to adopt the right attitude and outlook. I’d start here:
- Let go of the idea of full-retirement. From where you stand right now, it’s a burden you can’t afford to carry.
- Assume you will be working for the rest of your life.
- Embrace that you are not alone – millions of others are in the same situation.
- Never be bitter toward those who can or have retired; bitterness is another burden you can’t afford to carry.
- Recognize that you – and your life – have value and meaning apart from your financial circumstances, and vow to live your life to the fullest.
Adjust your retirement expectationsPeople in their 20s, 30s, 40s and 50s plan for – and fully expect – retirement at age 65. That is the retirement convention in our society, but there‘s nothing about it in holy writ.
In your own life, retirement won’t happen at 65, and probably not at 70 either. But 75 or 80 will hardly be out of the question. That gives you 15-20 years to prepare from where you are now! Let that be your time horizon, and pursue it actively.
At a minimum, there may come a time when you will be forced to stop working by physical limitations, and preparing for that eventuality should be your goal.
Lean into your strengths
You have your health, and that’s a solid foundation to build your life on. It’s better to have good health and poor finances than the opposite at just about any age.
Also, your recent foreclosure and bankruptcy – ironically – probably mean that you have no debt. If so, that’s a major advantage. Lot’s of people are going into retirement with substantial debt – that’s one problem you don’t have.
You’ve also been working in real estate for 20 years – real estate sales I presume – and even if the market never bounces back, that background gives you one gigantic advantage. As a real estate agent, you have learned to be an entrepreneur. You’ve learned to go out into the world and get business that you can convert into a paycheck. That is the most basic training for starting your own business of any kind. That also means you won’t be job dependent, which is very important at your age.
You also do side jobs, which demonstrates flexibility. This will be an essential quality since you probably won’t land a career type position at this point in your life.
A more tangible strength is your income property. You don’t give a whole lot of detail, but can you move into the property? My thought is that you occupy it, both as a place to live and as an opportunity to be “on site” to fix it up.
I’d make a plan to pay off the mortgage on the property in no more than 15 years. If you can, you’ll have either a) a debt free residence to live in, or b) a major asset to sell to raise retirement capital by age 75. Either outcome is a major positive.
Earning a living
So far, we’ve made two points on the work side: that you will have to plan to work the rest of your life, and that your 20 year real estate career has trained you for self-employment.
I’d try to start some sort of business – one with more stability than real estate sales – then either use your real estate business as a side venture, or your willingness to work side jobs as an additional source of revenue. Unless you can get a full-time job with decent pay and full benefits, you may need to rely on two or more income sources. You’re already well suited to that.
As to the business venture, I’d recommend that you gravitate toward some kind of work that you really like doing. If you have to work in your 60s and 70s, it will help tremendously if you do work that you like.
Start building retirement savings – YES – even now!
Lot’s of people would throw up their hands and give up on the idea of saving for retirement as a lost cause. Don’t let that be you! This is no time for fatalism! If you begin saving now, you’ll at least have something in 15-20 years.
Let’s say you start an IRA right now. If you max it out at $6,000 a year for the next ten years, you’ll have $60,000, plus accrued investment income, by the time you’re 70. If you’re married and both you and your spouse make the maximum contributions, you’ll have $120,000, plus accrued investment income, by 70. That may not be enough to fully retire, but at will give you a very large emergency fund that you can tap when extra funds are needed.
If you can build a successful business, you can save even more through self-employed retirement plans such as a SEP-IRA. That will allow you to effectively contribute up to 20% of your business income to the plan. (This is another point in favor of you having some sort of business of your own.)
You won’t be able to continue funding your retirement plans past 70 ½ in most cases, but you can continue to contribute $6,000 ($12,000 if you are married) into a Roth IRA. That will allow you to build your retirement savings for as long as you have earned income.
Social Security and Medicare
You can go on Medicare at age 65, and you should do so by all means. There are different schools of thought on Social Security however. One is that you should delay taking benefits until age 70, that way your monthly payment will be at the maximum level for your eligibility (it can be up to 32% higher at best).
The other is that you begin taking benefits as soon as you are able, which will provide more cash up front. Since your financial situation is uncertain, I’d take the benefits as soon as possible. There are two basic reasons:
- If you begin taking Medicare at age 65, but not Social Security, you will have to pay the Medicare premiums (about $100 per month per individual) out of pocket.
- Even if you don’t need the income immediately, you can use the Social Security benefits to help fund your retirement plan.
Your plan contributions cannot be based on your Social Security benefits, but the extra income will free up earned income for contributions. For example, you can make a full IRA contribution of $6,000 as long as you have at least that much in earned income for the year. Taking Social Security at 65 rather than waiting until 70 will give you extra cash flow for retirement contributions for another five years.
Back to the question: I’m 60 and have no retirement savings…
Your situation is far from hopeless. With a combination of a paid off income property, a solid cushion in a retirement plan, Social Security and Medicare, and even a small income from a side job or side business, you may find yourself living in a very comfortable semi-retirement by the time you are 70.
Not perfect, but not bad either. And one other thing that you probably already know better than most of us…stay out of debt! That’s yet another burden you can no longer afford to carry.
Do you have any advice you can offer Ted and others in the same situation? Do you disagree with any recommendations I‘ve made? (Please note: if your comments are critical, judgmental or condemning of Ted, they WILL be deleted.)