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Over 50 – No Pension, No 401K – What Now?

By Kevin Mercadante • 99 Comments

Let’s be honest, most retirement posts in the personal finance blogging world are aimed squarely at people in their 20s and 30s. Those over 50 are presumed to not exist. It’s almost ironic, isn’t it, talking about retirement to people who are so far away from retirement that it’s very nearly irrelevant while ignoring those for whom it’s right around the corner? And especially to those who have no pension or 401k.

Maybe it’s that the vast majority of people on the web are under 35, or maybe it’s just easier making multi-decade projections to a group of people so far from retirement that they’ll never remember any bad advice they’d gotten early in life. And in a different direction, all things are possible when your time horizon is 30, 40 or 50 years. Those magical retirement projections that’ll turn us all into millionaires just wouldn’t work without all those decades!

But what if you don’t have decades to accumulate a retirement fortune? What if you’re over 50 and retirement is just a few years away? If you don’t have at least a healthy six figure portfolio, how do you prepare for retirement now that the luxury of time is no longer available to work in your favor?

Get working on Retirement Plan B

Over 50 – No Pension, No 401K – What Now? Delay retirement. If retirement at age 65 isn’t a doable goal, move it out to 68, 70 or even 75. Not only will that provide extra time to accumulate additional funds for retirement, but it will also shorten the time period you need to cover. For example, assuming a lifespan of 85 years, you’ll need to accumulate enough money last for 20 years if you retire at 65. But delay retirement until 70, and you only need to cover 15 years. The longer you can work, the smaller your retirement savings need to be.

Ditch your debt – pronto! If you can’t raise the income, you’ll have to lower the outgo. If you won’t have a rich retirement plan to carry you in your golden years, then one of the single best courses of action you can take is to get to work on being debt free.

A disturbing trend is developing in which an increasing number of people are carrying higher debt levels into retirement than ever before. People are still paying mortgages well into their 70s! If retirement resources are on the slim side, you can’t afford to be one of the emerging elderly debtor class. Pound for pound, eliminating debt is more effective at improving cash flow than putting an equivalent amount into savings. This is especially true if you’re within 10 or 15 years of retirement. Equally important, once your debts are gone, you’ll have that much more money to put into savings.

Get started on a post-retirement career. Relatively few people will have the retirement resources by age 65 to live the classic life of an unrestricted full time retiree. (Most of the ones who will are already rich!) When we add to that equation the actuarial nightmare that is Social Security, a lot good people are going to be working a lot longer than age 65! Don’t dread it, embrace it!

You may not be able to continue on your present job, or even in your current career much past 65, but you have time now to develop a new career or to begin a side business. Get it going now, and build it up so that you can be fully self sustaining by the time you reach 65. Most people view retirement as an escape from work they

hate, but if you’re doing work that you truly enjoy it won’t feel like work and you may even lose the desire to retire.

Develop multiple income streams. If you don’t have a rich retirement plan, you can add a good measure of security to your financial picture by developing multiple income streams. Plan on relying on Social Security, an income from a side business, seasonal or part time jobs and as many passive sources as you can develop. Ten or 15 years may not be a lot of time to build a big retirement portfolio, but it’s more than enough time to develop two or three or more income streams.

If you’re interested in developing additional income streams, either for retirement or to help prepare for it and fund it, check out my post on freelance blog writing. It’s the kind of work and business you can easily run well past retirement age.

Start saving as much as you can now! I’m of the opinion that most people accumulate the biggest share of their wealth during a single ten or 15 year period when all things financial are breaking their way. Saving at an early age certainly helps, but life can get in the way of even the best executed savings plans, especially when you have children. But if you’re past the child rearing years, and at a high level in earnings, you can make up for lost time much quicker than you think. You may not have the time horizon to accumulate a seven figure retirement plan but what ever you are able to save from this point forward will make life that much easier later. Never give up hope on this!

Even if you’re covered by a retirement plan (and especially if you’re not) the IRS allows people who are over 50 and within certain very generous income limits to deduct up to $6,500 towards an individual retirement account (IRA). Even if you have no other savings, stashing away $6,500 per year for 15 years will grow to $97,500 plus investment income. That won’t be enough money to retire to the beach, but it will provide a nice cushion to back up paychecks from Social Security and any job or business income you have later on.

What ever you do, don’t speculate! There may be a strong temptation to “make up for lost time” by plowing money into risky investments looking to make a big hit. But it’s far more likely that you’ll get clobbered for trying. Since you have a shorter time horizon and less money to play with, keep your investment choices on the conservative side of the investment universe. Yes, you have less time to grow your portfolio, but you also have less time to cover large losses.

Stop worrying about it. We often forget that our lives are what we do everyday, not the grandiose plans we hope to achieve. While a generous retirement plan might make you more comfortable, it won’t necessarily make you happy—and that’s the real goal throughout life. Work on the non-financial aspects of your life—your health, your relationships, your faith, your hobbies and your passions. Those are the elements of life we truly crave, but often ignore in favor of financial pursuits because we mistakenly think they can be bought with money. The better your health, the stronger your relationships with God and with people, the happier you are, the more you live your passions, the less important money will be.

What would you suggest to a person over 50—or even over 40—who will be unlikely to accumulate a rich retirement plan by the time they reach 65?

( Photo courtesy of Robert Couse-Baker )

Category: Bank

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