I only wish I had, at 45 years of age, $250,000 in a 401(k), and a six-figure salary. That’s not something I can even remotely relate to, and while I understand it’s the choices made in life that put me into this situation I should at least reach out to see what your thoughts are and if you have any suggestions.
I’m 59, and currently have $45,000 in my 401(k). I contribute 6% of my salary, and own no property. I took out loans against my 401(k) during more uncertain times to pay down debt. I also have $65,000 in student-loan debt, which resulted from going back to college at the age of 46.
I have been free of addiction and alcoholism for 19 years now; in spite of the life I’ve lived, I’ve generally been a decent worker and I have had consistent employment since my early 20s, just no foresight to plan as I didn’t think I’d live past 40. I recently got a promotion and, as of next week, I’ll make $72,000.
‘I have had consistent employment since my early 20s, just no foresight to plan.’
The plan is to try and put more into my 401(k). It was originally a traditional plan, but converted it to a Roth 401(k) to get a better idea of what I’d have available in retirement with federal taxes already taken out. The first $30,000, from which the loans were taken out, was a traditional 401(k) and, therefore, subject to income tax at retirement.
I live pretty frugally, paying rent of $1,295, and groceries each week of no more than $50, internet at $45 for work, and occasionally spending on some tech toys that give me some enjoyment (a digital camera, drone, laptop, tablet, TV, etc.; I make these purchases every 3-5 years. I buy clothes in thrift stores.
However, it seems like no matter what I do today that my retirement is going to be a disaster. My student loans are burying me, and the fact that I really didn’t start contributing to a 401(k) until the age of 50 has me so far behind that I’m all but certain to struggle mightily in retirement.
What advice can you provide someone who’s truly struggling financially?
Looking for Hope
Dear Looking,
We’re all doomed.
If life is a stage or a movie that we get to star in, direct and write, the curtains and celluloid run out eventually — for all of us. The trick is to know that our story is uniquely our own — the good, the bad, the ugly — and everyone’s worklife, personal life, finances, and retirement are different. Yours is no exception.
Throw everything you can at your student debt, and make a budget to see if you can squeeze more than the monthly payment out of your income. The Education Department’s Loan Simulator allows you to compare repayment plans, claim the interest on your tax return, and maintain immaculate records in case there’s ever a problem.
Your mission, if you choose to accept it, is to keep doing what you’re doing. Live life. Enjoy life. Stay healthy. Keep on top of your annual doctor’s check-ups. Stay employed. Make sure you have employer-sponsored health insurance. Top up your 401(k) if you can, now that you’re over 50, and hopefully you get an employer match.
You’ve had a different trajectory to many people, but you’re not the only person for whom the wheels came off in your 20s and 30s. You are sober 19 years. Put that before everything. Anything you put before your sobriety, you risk losing. If you attend 12-step meetings, keep doing it and, yes, find someone who is less fortunate than you to help.
You’re not the only person for whom the wheels came off in your 20s and 30s. Anything you put before your sobriety, you risk losing.
Think creatively, says Teresa J.W. Bailey, president and senior wealth strategist at Waddell & Associates in Nashville, Tenn. “When individuals have positive feelings about the future, they have a greater ability to recognize additional resources,” she says. Look at ways you would enjoy earning extra income after your official retirement, she adds.
You’re on the right path, says Martin Schamis, head of wealth planning at Janney Montgomery Scott in Philadelphia. “Things may not be as dire as you imagine, given your frugality and discipline,” he says. “Your biggest challenge financially at this point is your student loans and continuing to balance paying those loans off with continuing to save and invest.”
Make sure you have your 6% employer match. You don’t say how your 401(k) is invested. “Make sure you have your 401(k) account invested for growth,” he adds. “This will give you the best opportunity for that account to outpace inflation over your remaining working years and then to grow enough during your retired years.”
What kind of Social Security can you expect when you reach Full Retirement Age? “Given your stated frugality, it’s quite possible that your Social Security benefit may actually cover your basic living needs once you’ve retired,” Schamis says. You can access your Social Security statement online at SSA.gov, and estimated retirement income.
Your retirement is not going to be a disaster. Your retirement will be your version of retirement. It may happen later or not at all.
Your retirement is not going to be a disaster. Your retirement will be your version of retirement. It may happen later or not at all. It could involve part-time work. If you like your job or the people you work with, it will give you purpose and you can still enjoy the work one day at a time, and appreciate the gifts of today.
Some people want to retire early — FIRE is so sought after that it’s a cottage industry in itself with influencers making money (that is, actually still working) by telling others how they supposedly did it — and that’s good for them, and it makes everyone else envious and feel sorry for themselves. But there’s a lot to be said for structure.
The older you get, the more you appear to realize how little you actually need. You are not alone in buying thrift clothes. They’re sustainable, and often last longer. Don’t compare yourself to others. If work gets you out of bed, and your colleagues are good and decent people, don’t knock it. Keep at it. Not everyone should retire at 65.
There’s no financial adviser who can wave a magic wand and make your troubles go away, and add zeros to your 401(k). But you can let go of any residual self pity — easier said than done, I know — and accept that you are a sum of the experiences that got you to 59, healthy (I hope) and with people in your life that enrich it.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
The Moneyist regrets he cannot reply to questions individually.
More columns from Quentin Fottrell:
Check out The Moneyist’s private Facebook group, where members help answer life’s thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.
By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
This post was originally published on Market Watch
