50 years old with no savings

[UnrealizedPotential]

I ran across a man recently that like the title says is 50 years old. He has no savings of any kind. He is married. He has no clue how to get started or what to do. All he will have is Social Security. I feel bad for him, and his wife.

So he asked me for advice. This man clearly needs help. So I gave him the best advice I knew how. I asked him if he is willing to work until 70. He told me he has already resigned himself to the fact that he has no choice .

So I gave him the name of a broker he can use. I'm not promoting the broker so don't want to say. I told him to open up a Roth Ira. Put whatever money you can in the SP 500 index fund. I drove the point home that withdrawals are tax free. I told him try to hold off on SS until age 70. Then at the same time he can take withdrawals from his Roth Ira.

I try not to give advice. But at 50 years old I felt this man didn't have time to get educated. I told him what to ask for help with and tried my best to steer him in the right direction. My thought was with the Roth Ira and SS he will struggle at age 70 financially , but at least he has some sort of a plan. I hope I did the right thing for him as it looked like he didn't know who to turn to , and really it was just blind luck I happened to see him . I do not know him very well.

I had no idea this would happen. Any thoughts are appreciated.

 

[Brianeboatman]

My .02...

I also know several people who are 50+ and have no savings. My mom and dad are two of them. They simply bury their head in the sand and have no plan. I have tried on multiple occasions to speak sense to them in an effort to get them to save. Nothing has worked. I've tried math, scare tactics, etc. and they simply won't take action. To each his own. I think you did your part. Good for you.

 

[Spock]

Before you can save you gotta have an idea where you're money is going.
"Budget" seems to be an ugly word now days, but ignoring the confines of a budget, tracking spending (with something like mint) is an almost painless way of see where it all went. If somebody is hand-to-mouth with only necessities, then they are probably going to have to rely on SS. But if they are dropping $60 a week at starbucks without really paying attn, they have room to start saving.

Some need to be kept away from their own money... so automatic withdrawals into 401Ks (+company match?), HSA's etc before they get their paycheck can be the best place to start.

 

[Big_Hitter]

he can still get a job, somewhere, that has a DB pension with cola

 

[aja8888]

he can still get a job, somewhere, that has a DB pension with cola

That's a possibility, if he is lucky and has a skill set that is marketable at age 50. I know folks here in Houston that tried that (oilfield types). Once you are "old", it's hard to pull it off.

 

[LRDave]

It's not clear from your description why a Roth is superior to a tIRA in this instance, but you generally offered the best guidance you could. Agree on the budgeting comment above as well.....

 

[pb4uski]

It all depends on what his non-discretionary expenses are. As you probably know, SS retirement benefits replace more income for low income retirees than it does for higher income retirees... roughly 55% for lower income retirees.

My grandmother lived pretty well on nothing else other than SS... in fact, she actually saved money while on SS because she lived frugally and her low income qualified her for subsidized senior housing (which was quite nice by the way).

 

[Katsmeow]

What I would want to know in this situation is why someone doesn't have savings. Do they work in a low wage occupation to where saving money is just very difficult? You say the guy has a wife. What kind of income does she have? (If the answer is none then maybe she needs to get a job). Has he had very high unusual expenses that are no longer occurring. Sometimes that happens (just as past medical expenses that are no longer recurring). Is it that he has adequate income but lives beyond his means. Does he have debt? Does he own his home or does he rent?

Depending on answers, the first thing I would suggest to someone is to try to create a budget where it is possible to save at least some money. This may involve trying to increase income through a job change (if feasible), a second job, or the spouse working (if she doesn't). Then, save money for an emergency fund so that when they happen he has some money to pay for those things. Then start saving money. (If he has debt then debt payoff is in there also).

 

[rothlev]

I ran across a man recently that like the title says is 50 years old. He has no savings of any kind. He is married. He has no clue how to get started or what to do. All he will have is Social Security. I feel bad for him, and his wife.

So he asked me for advice. This man clearly needs help. So I gave him the best advice I knew how. I asked him if he is willing to work until 70. He told me he has already resigned himself to the fact that he has no choice .

So I gave him the name of a broker he can use. I'm not promoting the broker so don't want to say. I told him to open up a Roth Ira. Put whatever money you can in the SP 500 index fund. I drove the point home that withdrawals are tax free. I told him try to hold off on SS until age 70. Then at the same time he can take withdrawals from his Roth Ira.

I try not to give advice. But at 50 years old I felt this man didn't have time to get educated. I told him what to ask for help with and tried my best to steer him in the right direction. My thought was with the Roth Ira and SS he will struggle at age 70 financially , but at least he has some sort of a plan. I hope I did the right thing for him as it looked like he didn't know who to turn to , and really it was just blind luck I happened to see him . I do not know him very well.

I had no idea this would happen. Any thoughts are appreciated.

I would not recommend a roth in this situation. He is likely going to be in a 0 tax bracket at retirement - even 20k per year withdrawn from a traditional is not going to trigger tax. he would be better advised to set up a traditional IRA, or contribute as moch as is affordable to a 401k ( deductible ). Assuming he is working he is. paying taxes now .

 

[rothlev]

I also would not recommend a fee advisor - just a simple balanced fund -

 

[HenryD]

It all depends on what his non-discretionary expenses are.

+1 As long as the income is there and expenses can be brought under control 50 is not that old. Things could look dramatically better by 60.

Dramatic year over year networth increases can be very motivating and are easier to pull off when you are starting from nothing.

 

[Aerides]

You don't say he's unemployed so I'm assuming he's working. Working till 70 for a 50 year old isn't that strange (FRA is 67 for us anyway).

A 50 year old married with no savings is not even slightly uncommon. If he has any decent income he can change that. The "i have no clue" - while it may just be your characterization - doesn't really make me feel bad. It makes me wonder ...why not? It sounds more like his way of pushing you off or quickly deflecting his situation.

I'd start him off by directing him to find some nice simple primers on saving and investing - 101, For Dummies, or any other one of hundreds of books on the topic. Basic knowledge on this stuff isn't hard to find. Get a 401k, put aside $X every month, start simple, etc.

 

[kgtest]

It all depends on what his non-discretionary expenses are. As you probably know, SS retirement benefits replace more income for low income retirees than it does for higher income retirees... roughly 55% for lower income retirees.

My grandmother lived pretty well on nothing else other than SS... in fact, she actually saved money while on SS because she lived frugally and her low income qualified her for subsidized senior housing (which was quite nice by the way).

+1. my grandmother is "livin' this dream" right now. She even saves a little which I think is neat since she's been retired for over 20 years...it hasn't amounted to much (a small CD and maybe a 2k savings account my dad sort of holds in his name to keep the subsidy police at bay).

She loves her life. She gets excited for Bingo night, her great grand kids...and the casino trips with the gals from her apartment complex (sr living).

At 88 I know she wishes she could still be driving, but a few minor fender benders earned her a full time Uber lol.

She gives each grand kid $20 for their birthdays...she could save that money but she is helping our kids with college and that is neat too! It's the small things.

 

[robnplunder]

In addition, give him the address of ER website ....

 

[Big_Hitter]

That's a possibility, if he is lucky and has a skill set that is marketable at age 50. I know folks here in Houston that tried that (oilfield types). Once you are "old", it's hard to pull it off.

I was thinking gubmint jerb

 

[HI Bill]

Does he have access to a 401(k)? If so, investing in a target date retirement fund should be his first priority, as this will allow him to save without losing much take-home pay. Second priority is to evaluate spending and income. Figure out where to cut. In 15 years, I went from $10K to $1M, so if he has a decent job, and not too much debt, and can make saving/investing a priority, then he stands a chance of retiring at 65. If SS will be enough for him to live on at 70, he'd only need to save enough to bridge the 5 years from 65 to 70.

He needs a financial plan. Evaluate SS benefits at 67 and 70. He needs help, but if he hasn't started by age 50, I don't hold out a lot of hope. But it IS possible!

 

[COZICAN]

I have plenty of friends and coworkers in the 40-60 range who have no savings and no real plan other than continuing to work and SS. Some have six figure incomes and are fairly intelligent. I don't get it. Whats weird is they actually look down on me whenever the topic of retirement comes up. I've known most of them for 20+ years so they are fairly aware of my financial situation.

 

[HI Bill]

I have plenty of friends and coworkers in the 40-60 range who have no savings and no real plan other than continuing to work and SS. Some have six figure incomes and are fairly intelligent. I don't get it. Whats weird is they actually look down on me whenever the topic of retirement comes up. I've known most of them for 20+ years so they are fairly aware of my financial situation.

+1. Some just follow the puritanical work ethic. Most can't fathom planning ahead and sacrificing spending now, for the future. Most can't/won't/don't look ahead 10+ years. Most can't understand how one of their coworkers can afford to retire early. "What will you live on?" is the most common question I'm asked.

So, I've transitioned from saying I'm retiring to saying I'm going to transition to being a professional photographer. I'm sure it will bring in a couple hundred a year!

 

[Dtail]

401k if possible especially with a company match.

 

[imoldernu]

Investopedia says this:

Fiftysomethings
If you're in your 50s, you're nearing retirement age but still have time to save. You also might be paying your children's college tuition, helping with car payments, gasoline and any number of other expenses. The house may be getting older and need fixing up, and your medical bills are almost certainly rising.

The estimated median savings of fiftysomethings is about $117,000 – far shy of the desirable six to eight times annual income that Fidelity recommends.

If you are over 50, you can contribute an extra $1,000 a year to your IRA and an extra $6,000 a year to your 401(k) or 403(b) in what is known as a catch-up contribution. Besides taking advantage of catch-up contributions, consider downsizing by selling your home and collecting any appreciated value. If you have company stock options or other assets, don’t forget to consider those as part of your retirement balance, even if they don’t sit in a retirement account. Consider meeting with a financial planner, especially one who specializes in retirement, to get things in order.

Closer to average than most who post here. If I were giving advice (I try not to ever do that), I'd start out this way.

Not a panic situation... Do this, assuming that the current job will continue.
Estimate SS @ 65 from gov't calculator.
An in-detail spread sheet of expenses, with an actual, a nominal, and an austerity column.

Where he'd like to be in retirement... Still working? Spouse?
Willing to work part time? Cost of living... home/rental costs and willingness to move. Sin costs... travel, entertainment, automobile expense (anything other than food and basic health costs, and nominal fallback expenses).

A living budget... simple.

How much more is needed beyond Social Security to continue this simple budget?

Can he/they live on SS? If not, how much more would be needed?

It's a 'easy to calculate' start.
.................................................................................................

It's what jeanie and I did @ age 53, 30 years ago... and not too far off on $$$ part.
We adjusted.

 

[Z3Dreamer]

For over 25 years, I was involved/administered the retirement plan where I worked. Many is the time, I spent hours educating or attempting to educate people about saving for retirement. I now realize that some are just not savers. That new car/fancy vacation/nice lifestyle is more important than planning for retirement. Now, I don't offer advice. If someone is 50 and hasn't begun, then you are wasting your time.

 

[joeea]

So he asked me for advice. This man clearly needs help. So I gave him the best advice I knew how. I asked him if he is willing to work until 70.

Why 70? Seems like he should work until he can't or until he achieves his (currently unstated) goals.

I told him to open up a Roth Ira. Put whatever money you can in the SP 500 index fund.

He hasn't been able to save anything in 50 years. Where is this Roth IRA money going to come from?

I told him try to hold off on SS until age 70.

Excellent advice!

Any thoughts are appreciated.

I'm sure you did the best you could.

But clearly this person needs advice on how to save, not where to put the nonexistent savings.

Tough situation.

 

[UnrealizedPotential]

OP here, I just wanted to add what little extra information I can. The 50 year old with no savings runs a small business. As far as I can tell he is the only employee.
I know he rents and doesn't own a home. I had the strong feeling from our conversation he didn't have much money to invest.

It's unclear to me if a t-ira would be better than the Roth Ira I suggested for his situation. One thing I'm certain of is a Roth Ira is much, much better than doing nothing at all, and I really had to think fast on the spot. I might not ever see him again.

I just hope I helped him and wish him and his wife the best of luck.

 

[pb4uski]

The tIRA vs Roth is really a tax rate play... today's tax savings vs future tax cost.

If his retirement income is mostly SS then that SS will likely be non-taxable and his marginal tax rate in retirement will likely be zero as other income would be offset by the standard deduction. If his marginal tax rate today is 10% or 12% (or more) then a deductible tIRA would be beneficial.

The benefit of a Roth is that if he saved some and had a financial emergency then he could withdraw Roth contributions with no tax or penalty.... so while a tIRA might save him some taxes the Roth may provide more financial flexibility... and that incremetal financial flexibility may make him more comfortable saving.

Or actually, even a taxable online savings account would be a step up from nothing at all.

 

[NYEXPAT]

I would try a "Lotto put" on the S&P 500!