Any advice for someone starting saving for retirement VERY late?

[msincogneato]

51, never married, no kids.

I never saved much for retirement and what I did save was swindled away from me by my ex-fiance (who also left me drowning in credit card debt, which I discharged via bankruptcy).

I have a new IRA via my employer, I am doing 5% right now and they match up to 3%. I don't have a lot of extra money to invest / save (maybe $250 a month). I welcome any advice you might be able to offer to help me catch up!

And I appreciate everyone's kindness in not pointing out what I already know: that I should have started MUCH earlier, and that what I do have to work with, isn't very much.

xoxo,
L.

 

[bloom2708]

https://www.bogleheads.org/wiki/Bogleheads®_investment_philosophy

 

[jazz4cash]

It’s NOT too late! Learn the lingo….I suspect your employer plan is a 401k, 401a, or 403b, not an IRA. 5% is ok to get you started, but save till it hurts to get that % up. Learn the rules of your plan. Post your plan’s investment choices here for more help. The more you share, the more help you’ll get. Best Wishes.

 

[Markola]

https://www.bogleheads.org/wiki/Bogleheads®_investment_philosophy

Link didn’t work. Try again?

 

[Markola]

OP, Social Security is some of the best retirement income available, as it is inflation protected and, despite the common media hysteria, more reliable than any other source. One cornerstone of your plan might be simply figuring out how to support yourself until age 70, when maximum SS kicks in. Good luck.

 

[OldShooter]

There is a well-known economist named Larry Kotlikoff who has a product called ESPlanner. The program is kind of a monster, probably well beyond anything you want to tackle, but I think that his philosoply is worthwhile pondering. Basically, he suggests that one's financial goal should be a fairly level spend rate both before and after retirement. Obviously this means that one must save prior to retirement in order to have savings to replace salary income. Looked at another way, it is suffering pain now in order to reduce pain later.

So in that context, is the 5% plus $3K/year "extra money" plan enough (with SS) to make you happy in retirement? My guess is no, in which case I suggest that you revisit your assumptions and look for ways to live further below your means and save more in the employer plan and in your own accounts. Pain now, reduced pain later.

 

[Aerides]

No matter your age:

In order:
Establish a 6 months emergency Fund
Clear any/all debt besides a mortgage
Increase the 401k to the annual cap
Then...
Start taxable investment savings
Invest any bonus, extra income

 

[Dtail]

Despite your ER moniker, perhaps you would like to join us on Feb19th in Sarasota for a ER get together lunch around 2pm.
It is a really nice get together on a yearly basis. You would receive lots of good advice in person, which will probably get you more comfortable going forward.

 

[HI Bill]

No matter your age:

In order:
Establish a 6 months emergency Fund
Clear any/all debt besides a mortgage
Increase the 401k to the annual cap
Then...
Start taxable investment savings
Invest any bonus, extra income

+1. And LBYM.

 

[ut2sua]

In order:
1-Establish a 6 months emergency Fund
2-Clear any/all debt besides a mortgage
3-Increase the 401k to the annual cap
Then...
Start taxable investment savings
Invest any bonus, extra income

OP, depending on your financial situation, if you can just get the top 2 in the above list done in a year or two (if not already there), that would be huge.
Once you got those 2 done, move to the 3rd (increase 401k to the annual cap) if possible.
Assuming you will work until 67 or so, you will still have ~15 years to invest. Things will move very slowly at the beginning, but once you have some good amount of $ invested, your net worth will increase much faster.
So the key is to start now focusing on 1 and 2...
Even if you can never get to 3 and beyond, just having 1 and 2 done will change your life (moving toward much more positive direction). Being debt free and having some emergency fund will bring stability to your life, and you will enjoy a much low stress life style. Good luck.

 

[Dash man]

When I realized I was behind saving for retirement, I worked a second job to save more. It was a great kickstart to my savings.

 

[rodi]

Welcome msincogneato -

The advice given is good, but not easy to accomplish. Agree completely with Aerides that the very first step is to pay off any credit card debt and other personal debt and to establish a decent emergency fund.

But lets talk about the elephant in the room. You say you can't do much more than 5% into your 401k.... So you'll have to figure out how to improve that.

The hard part is to cut your spending so you CAN save/invest. It will not be easy. Go for the low hanging fruit first... the obvious stuff like starbucks vs homemade coffee, cut down on meals out and cook at home... bring in lunch from home. The next low hanging fruit is every recurring expense... Cell phone carriers - there are a lot of good deals on plans that have unlimited talk/text/data for $30/month... If you're paying more, change carrier. Cable - cut the cord. If you have a boatload of streaming services, look at reducing to one or tow. Car/home insurance, shop price every renewal. When I got serious about cutting expenses I was able to cut a few hundred per month with very little effort... that money was then redeployed to debt reduction and savings.

There are some people on the forum who got here through hefty salaries, but lots of others who got here through being frugal. You'll need less money to support retirement if you learn to live on less money.

If you have credit card debt look at doing snowball payments... Have a fixed amount you allocate to retiring the debt. Pay the extra on the highest interest payment card till it's paid off, then reallocate that extra money to the next highest card... until they are all paid off and you pay them in full each month.

You've got this. But it will take discipline. Welcome to the forum!!!

 

[street]

Welcome msincogneato -

The advice given is good, but not easy to accomplish. Agree completely with Aerides that the very first step is to pay off any credit card debt and other personal debt and to establish a decent emergency fund.

But lets talk about the elephant in the room. You say you can't do much more than 5% into your 401k.... So you'll have to figure out how to improve that.

The hard part is to cut your spending so you CAN save/invest. It will not be easy. Go for the low hanging fruit first... the obvious stuff like starbucks vs homemade coffee, cut down on meals out and cook at home... bring in lunch from home. The next low hanging fruit is every recurring expense... Cell phone carriers - there are a lot of good deals on plans that have unlimited talk/text/data for $30/month... If you're paying more, change carrier. Cable - cut the cord. If you have a boatload of streaming services, look at reducing to one or tow. Car/home insurance, shop price every renewal. When I got serious about cutting expenses I was able to cut a few hundred per month with very little effort... that money was then redeployed to debt reduction and savings.

There are some people on the forum who got here through hefty salaries, but lots of others who got here through being frugal. You'll need less money to support retirement if you learn to live on less money.

If you have credit card debt look at doing snowball payments... Have a fixed amount you allocate to retiring the debt. Pay the extra on the highest interest payment card till it's paid off, then reallocate that extra money to the next highest card... until they are all paid off and you pay them in full each month.

You've got this. But it will take discipline. Welcome to the forum!!!

This is some great advice!! Need to make saving and investing in you first then what's left you can live on. Frugal and live below your means.

 

[2HOTinPHX]

I would suggest doing a budget if you aren't already doing so. That way you know where your money is going and where you might be able to cut back. Try to increase your income with additional work via overtime or a part time job can be helpful.
Also keep in mind you may not need the million dollar magic number we hear hyped all the time. It really depends on your spending needs. There are plenty who do fine on way less. If the roof over your head is paid for and you have no others debts by the time you want to retire it will help a lot.

There are a lot of great videos on YouTube.

 

[Hank]

Pay yourself first before anything else. After a few years it will snowball....

 

[Teacher Terry]

A couple of ways I saved money was switching to T-Mobile prepaid plan for a flat fee of 15/month. It includes unlimited talk and text with 3gb of data. You have to order it online and they overnight you a SIM card. If you go to the store they won’t do it.

I also have you tube tv for 64.99/month and then share it with a friend so the cost is half. Find the cheapest grocery store in your area and shop there. I also shop for car/home insurance every couple of years to see if I can do better. Good luck).

 

[2HOTinPHX]

A couple of ways I saved money was switching to T-Mobile prepaid plan for a flat fee of 15/month. It includes unlimited talk and text with 3gb of data. You have to order it online and they overnight you a SIM card. If you go to the store they won’t do it.

How long have you had that plan? The least expensive plan I see is 40 a month for 10 gigs at prepaid.t-mobile.com.

 

[Teacher Terry]

I have had it for a year.

 

[Badger]

Welcome msincogneato -

The advice given is good, but not easy to accomplish. Agree completely with Aerides that the very first step is to pay off any credit card debt and other personal debt and to establish a decent emergency fund.

But lets talk about the elephant in the room. You say you can't do much more than 5% into your 401k.... So you'll have to figure out how to improve that.

The hard part is to cut your spending so you CAN save/invest. It will not be easy. Go for the low hanging fruit first... the obvious stuff like starbucks vs homemade coffee, cut down on meals out and cook at home... bring in lunch from home. The next low hanging fruit is every recurring expense... Cell phone carriers - there are a lot of good deals on plans that have unlimited talk/text/data for $30/month... If you're paying more, change carrier. Cable - cut the cord. If you have a boatload of streaming services, look at reducing to one or tow. Car/home insurance, shop price every renewal. When I got serious about cutting expenses I was able to cut a few hundred per month with very little effort... that money was then redeployed to debt reduction and savings.

There are some people on the forum who got here through hefty salaries, but lots of others who got here through being frugal. You'll need less money to support retirement if you learn to live on less money.

If you have credit card debt look at doing snowball payments... Have a fixed amount you allocate to retiring the debt. Pay the extra on the highest interest payment card till it's paid off, then reallocate that extra money to the next highest card... until they are all paid off and you pay them in full each month.

You've got this. But it will take discipline. Welcome to the forum!!!

Perfect! +1
To take some of the sting out consider taking a few hours out to do a number of searches on your computer for making a list of free and low cost activities. Spending money for entertainment does not necessarily equate to the most enjoyment. I did this for a close friend who was the definition of "spending like a sailor on shore leave". He also lost most everything and landed in deep debt. The list I made filled more than 2 pages single spaced. Most of the activities my wife and I have been doing for years were on that list because we enjoyed them.

Cheers!

 

[Golden sunsets]

Msincogneato; Great advise so far. With food so expensive, I would check the grocery flyers weekly and find the bargains especially for protein. Plan your weekly menu around those specials. Use a crock pot to prepare low cost, nutritious meals that save you time and money. Stay away from restaurants.

Sent from my SM-T510 using Early Retirement Forum mobile app

 

[Surewhitey]

Definitely consider everything you are spending and cut back on unnecessary things. Review all subscriptions (Netflix, Prime, gym, etc) and find less expensive ones. Food is a big one for me, shop smart. Review insurances and make sure you are getting the best rates.

A side gig is a great way to boost your 401k available funds or pay off any debts. Definitely get rid of debt first... After emergency fund of course. Add tax return checks & any bonus to the 401k.

Ask for a raise... Or to another, higher paying position.

 

[pb4uski]

This is some great advice!! Need to make saving and investing in you first then what's left you can live on. Frugal and live below your means.

OP, if you puruse the forum you will find that one of the common denominators of forum members is what we call LBYM... live below your means. Once you learn to do that, you can save the excess for retirement.

And one way people do that is to "pay yourself first" by figuring out what they can prudently save from their income and setting that up as withdrawals from their paycheck so their net pay is available for spending.

Once you know what you need for spending you can see what your social security retirement benefits will be and if there is any gap between what you need to live and what you will receive in social security. That gap has to be funded with retirement savings or a pension is you are lucky enought to have one. FIRECalc can be useful in looking at how much retirement savings that you will need to fund the gap.

 

[Closet_Gamer]

Excellent advice.

Take heart: i have a brother who found himself in similar circumstances when he was 56. A bit less dire as he didn't have to declare banktruptcy and he has a SMALL pension coming when he turns 65.

But he leaned into it HARD.

We followed exactly the priorities other have laid out re: 6 months emergency fund, etc.

Allow me to re-emphasize three things:

1 - Burn the credit cards; debit or a money back reward card that you pay off every month
2 - 6 months emergency fund; that's how you ensure a bad situation doesn't turn into credit card debt
3 - Build and track a budget; you can't LBYM unless you know very specficially what your means are and how you will accompiish it.

My brother now has over $100k in his investments and is putting money away $1000 automatically each month.

You can do it too.

 

[pb4uski]

OP, Social Security is some of the best retirement income available, as it is inflation protected and, despite the common media hysteria, more reliable than any other source. One cornerstone of your plan might be simply figuring out how to support yourself until age 70, when maximum SS kicks in. Good luck.

+1, especially for a single person in good health and good longevity prospects. If your full retirement age is 67 and you start SS at 62 then you'll get 75% of your primary insurance amount (PIA) whereas if you defer to 70 you get 124% of your PIA.

So let's say that your PIA is 100. You forgo 8 years of 75, or 600, to get 49 more per year (124-75), inflation adjusted, for the rest of your life. You can't get that screaming deal anywhere else.

So at a minimum, plan to try to save enough so you can defer SS to 70 if you are in good health and have good longevity prospects.

 

[pacergal]

Welcome to the forum!
It sounds like you went through (and survived!) a horrible experience with your former fiancé both emotionally and financially. And are ready to move forward for yourself.

Lots of good advice posted already. So many here are willing to help and are knowledgeable in all things. If you are willing to post particular questions or even your expenses, you will get some helpful advice.

You have started a new IRA and are saving 5%, good start! If, after looking at your expenses, you have about $250 month available per your post, put that into a savings account for emergencies. If you have an emergency fund, then invest that $250/month.

Start reading about investing and retirement. Check bogleheads forum--they have some good books listed.

Best of Luck to you, and feel free to ask questions.