50 years old with no savings

[UnrealizedPotential]

joeea,

I thought you had a couple of good questions and I will answer them as best I can. Why age 70? Well, that's the longest he can postpone SS without having to take it. The other reason is I tried to give the man some hope. If I said, you might not ever be able to retire I might have discouraged him from even trying.

Where is the money to invest going to come from, since he hasn't saved anything in 50 years? From my conversation with him I got the feeling he could have saved something, he just over looked it. He wasn't concerned about it. Kick the can down the road sort of thing. I think he woke up one day, and realized he was in trouble.

But yes, I do not think he will be able to save much, I hope I'm wrong on that, but from talking with him he can surely save something, and that's the important thing is to get something going.

ETA-He was concerned that SS was not going to be enough for him to live on. He was worried that was all he had to rely on and he is right to be worried IMO.

 

[LimaPop]

Did he own his house outright, or still paying interest on a mortgage?

 

[UnrealizedPotential]

Did he own his house outright, or still paying interest on a mortgage?

He doesn't own a home, and he rents. So he can't get any money in the future that way by selling it or doing a reverse mortgage. No possibility there. He has nothing. It's tough.

 

[GenXguy]

Like some other said, SS may be enough to live comfortably. It depends what his SS is. If he's still married, the couple will also receive spousal benefits. But, it depends on his expenses as well as to how comfortable of a retirement that will provide.

I could work until age 65 and live off SS alone with my current budget and estimated Medicare plans/supplement costs with a little bit of discretionary spending funds, but it would be tighter than I like, for sure. If I worked until age 70, I would have nice chunk of discretionary funds based on SS alone. But fortunately, I have a nice stash and plan to FIRE at 55 and will have even more discretionary funds available. I've been saving all my life, even when I had low paying jobs - not sure why some people never manage to do it.

 

[joeea]

I thought you had a couple of good questions and I will answer them as best I can. Why age 70? Well, that's the longest he can postpone SS without having to take it. The other reason is I tried to give the man some hope. If I said, you might not ever be able to retire I might have discouraged him from even trying.

I understand. I guess I would have phrased it more like "Well, you probably want to plan on working to 70, then see where you are at that time."

Glad to hear you encouraged him to delay taking social security benefits until 70. Sounds like he will be able to use the max amount.

Where is the money to invest going to come from, since he hasn't saved anything in 50 years? From my conversation with him I got the feeling he could have saved something, he just over looked it. He wasn't concerned about it. Kick the can down the road sort of thing. I think he woke up one day, and realized he was in trouble.

Ah, okay. That didn't come across in your original post, but at least holds out some hope.

But yes, I do not think he will be able to save much, I hope I'm wrong on that, but from talking with him he can surely save something, and that's the important thing is to get something going.

Great. I think saving something is far, far more important for him that whatever savings vehicle he chooses. Without the savings, nothing else will
matter.

ETA-He was concerned that SS was not going to be enough for him to live on. He was worried that was all he had to rely on and he is right to be worried IMO.

Did you explain to him how to determine what he will get from SS, and how to determine what he will need to live on?

My concern here would be him thinking that there was some Roth magic that was going to save him.

You did the best you could. Sounds like you didn't have much to work with.

You said you "ran across this man" and that he asked you for financial advice. Is this a friend? I'm wondering how someone stranger you happened to run across would start asking for money advice.

 

[UnrealizedPotential]

joeea,

I didn't go into specifics about SS. He seemed to think SS wouldn't be enough for him so maybe he contacted them and got some information regarding his future benefit. If I ever see him again I will ask if he is on the SS website. You can do a lot of things on that website. I'm only 49 but I'm on there.

He is a stranger pretty much. I have only seen him twice in the now over 3 years I have lived here. He has a very public business . To answer your question I would have to give his occupation and to protect his identity I cannot give the city, his occupation or anything else that might identify him.

While he was helping me he asked what I do for a living. I told him I am an investor. I don't like to say retired. People take it the wrong way if you don't look old enough. When I said that, he opened up that he needed and wanted my advice. That's how it started, I showed up randomly at his place of business. I think "ran across" may have been a poor choice of words on my part.

 

[The Cosmic Avenger]

I have a couple of friends like that. One tries hard, but has chronic illness and has trouble working full-time. And I get the feeling that that friend saw other people buying houses and feels like it's a mature, responsible thing to do, so they got a very good deal on a fixer-upper, but then they don't have the money for the emergency repairs and get even deeper in the hole. The other is more of a pure spendthrift, who doesn't save and yet goes on more vacations than we do. I worry about both of them, as the first one is a more recent but wonderful friend, and the other I've known since childhood and is like family to me.

 

[sheehs1]

The only other thing I can add is he needs to have some lightbulb go off (maybe you were his lightbulb UnrealizedPotential), believe he can do it or at least make a material difference in his/their situation and see the path to get there no matter the $$ goal.

For me the lightbulb was 25 + years or so ago when I saw a spreadsheet that showed the affects of investment compounding + adding additional savings to it each year. Even when I had the years of college educations ahead of me.

I agree with Katsmeows advice too. Budget, save the 6 months of expenses, continue saving and invest it. He has 20 years to 70.

 

[LRDave]

All of the positive speculation here supposes he can continue to work uninterrupted until 70. I doubt that is the case. Age discrimination is a thing....

 

[Elbata]

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 .

Agreed. Not even close to needing a ROTH.

 

[RxMan]

I told him I am an investor. I don't like to say retired. People take it the wrong way if you don't look old enough.

I may have to borrow that investor title when I finally retire. That sounds better than just saying I’m retired.

 

[bada bing]

I don't have advice, but an anecdote (me). 23 years ago I had less than zero, I was about $75K underwater and fresh out of my second (and final) divorce. I am financially ready to retire now, 23 years later. I have enough to bridge 9 years until 70 on both SS and starting my pension with a nest egg left over. Your friend isn't in an impossible situation if he gets his plan going. I went scorched earth on earning and saving after my close call with bankruptcy.

It could be useful for him to look at https://www.socialsecurity.tools/ and play around with the graphical tools showing different SS claiming starts.

The biggest thing is he needs to get focussed on income as well as savings. Bringing in more fixes a lot of earlier sins, if he has the ability.

 

[CoolRich59]

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

This. If he isn’t willing to get a handle on his spending and start saving, the best investment advice in the world isn’t going to do any good.

 

[Maenad]

All of the positive speculation here supposes he can continue to work uninterrupted until 70. I doubt that is the case. Age discrimination is a thing....

Since he has his own business, he's probably OK. In general, totally agree with you - I tell any new college grads at work (if financial topics come up) that they should expect to only work until 50. You don't see a lot of 50+ engineers around at the companies I've worked for.

 

[joeea]

joeea,

I didn't go into specifics about SS. He seemed to think SS wouldn't be enough for him so maybe he contacted them and got some information regarding his future benefit. If I ever see him again I will ask if he is on the SS website. You can do a lot of things on that website. I'm only 49 but I'm on there.

He is a stranger pretty much. I have only seen him twice in the now over 3 years I have lived here. He has a very public business . To answer your question I would have to give his occupation and to protect his identity I cannot give the city, his occupation or anything else that might identify him.

While he was helping me he asked what I do for a living. I told him I am an investor. I don't like to say retired. People take it the wrong way if you don't look old enough. When I said that, he opened up that he needed and wanted my advice. That's how it started, I showed up randomly at his place of business. I think "ran across" may have been a poor choice of words on my part.

Sounds like a bartender.

Anyway, the best thing you could do for a stranger that you only see once or twice would be to point him to sources of information, rather than trying to give him specific advice. You don't have enough details to give him useful advice.

If you ever do run into him again and he asks for advice, you should write down a few websites, books, podcasts, etc.

Rather than trying to hand him a magic fish, give him places where he could learn to fish for himself.

 

[ckelly78z]

Getting to the age of 50 with no savings sounds like a fundamental failure of proper thinking. He has been spending his money on something up to this point, and will have difficulties, not continuing that trend.

A multi faceted approach of spending cutbacks, sticking to a new budget that he creates, and automatic savings are his only hope achieving F.I. at around 70. It doesn't sound like he has the discipline to accomplish this, so results are questionable.

 

[rothlev]

The other thing that is scary about his situation is if he is a small businessperson, he may not be declaring all his income. This saves money today, but at retirement he may be in for a surprise at how low his social security benefit is if this is the case. Hopefully he has been paying into social security.

It happens a lot. I see lots of UBEER drivers for example, after they write off the mileage there is basically no taxable income left.

 

[mystang52]

We're all preaching to the choir here. Based on OP's clarification of his relationship with the 50 year old, I'll bet dollars to donuts that his original good advice fell on deaf ears. Best LIKELY case scenario is that the 50 year old actually heard OP's advice, doesn't change his ways now, but in a year or two...or 3 .. he'll recall the conversation and get cracking at that time.

 

[mrfeh]

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've suggested a tax deferred account instead of a Roth.

I also wouldn't say it's too late to get educated. A couple hours spent on the bogleheads wiki is all that's needed.

 

[UnrealizedPotential]

I would've suggested a tax deferred account instead of a Roth.

I also wouldn't say it's too late to get educated. A couple hours spent on the bogleheads wiki is all that's needed.

You could be quite right about the tax deferred being better than a Roth for him. The question I would have for you is why? How would he benefit better from tax deferred than a Roth? I am just trying to learn your reasons so I can better understand.

 

[mrfeh]

You could be quite right about the tax deferred being better than a Roth for him. The question I would have for you is why? How would he benefit better from tax deferred than a Roth? I am just trying to learn your reasons so I can better understand.

Given he has no savings, I am assuming his marginal tax bracket will be lower in retirement. In that case, the Roth is the inferior choice.

 

[JustCurious]

I also wouldn't say it's too late to get educated. A couple hours spent on the bogleheads wiki is all that's needed.

You can lead a horse to water but you can't make it drink.

 

[Filetmerlot]

Is the small business worth anything? Would he be able to monetize the business when he wants to retire?

 

[UnrealizedPotential]

Given he has no savings, I am assuming his marginal tax bracket will be lower in retirement. In that case, the Roth is the inferior choice.

But will he end up with more money in the end with a t-ira than a Roth? That's the part that I can't figure out. I don't know his income now, but I think it's a safe bet it will be lower income in retirement for him, if he is even able to retire.

 

[mrfeh]

You can lead a horse to water but you can't make it drink.

Very true. But if one is willing to learn, it is never too late.