I am 69 and have been working for the same company for 45 years. I have a pension of $250,000. My company was bought out and the pension was frozen by the new company in 1997. The current company moved the pension to Fidelity, but not as part of my benefits.
I have a 401(k) of $121,000 and company stocks of $53,000. The low figure for my 401(k) is due to many issues, including mismanagement and not looking at the future objectively. I plan to work and contribute to a 401(k) in addition to a stock-purchasing plan for a few more years.
I am receiving full Social Security ($3,507) and I purchased the home I had been renting for 12 years prior. My wife, 61, does not work due to health issues. She also has a pension of about $53,000 and a 401(k) of $47.000. She worked for the same two companies as I did.
My wife has not worked for the last 15 years. We do not have significant debt other than the outstanding mortgage on our house. What do you think is the best way to continue repairing the damage done in the past?
Not Yet Retired
Related: ‘Why am I so afraid to retire?’ I’m 60 and lost $1.2 million in a divorce. Can I rebuild my life?
Dear Not Yet,
Can we take a moment to focus on what you’ve done right? You’ve done so much right.
You kept working because you knew you had to build up your pension and stock-purchasing plan. You waited to claim your Social Security to get full benefits. You are married and, it seems, happily so. You bought a house and made progress on paying off the mortgage.
And let’s not overlook the biggest achievement of all. You made it to 69. Congratulations! That’s a gift and we should never take aging for granted, despite the fact that it comes with complications. Given that you’re still working, I assume you’re in relatively good health.
Given that you don’t have a massive 401(k) to fall back on, waiting to claim your Social Security was a huge plus, and something that you should give yourself credit for doing. If you had claimed it at 62, for example, you’d only get 70% of your full amount.
You’ve done so much that is right.
Many people make mistakes with their 401(k). They don’t contribute enough, fail to take advantage of the annual $7,500 catch-up contributions after 50, don’t oversee their investment strategy, or don’t distinguish between a Roth 401(k) and a traditional 401(k).
Or they get into financial trouble elsewhere, such as credit-card or personal debt. Or, they may withdraw money from their 401(k) early — before the age of 59 ½ — meaning, in addition to paying tax on those withdrawals, they must pay a 10% penalty. They rob themselves of future growth.
You may not be where you want to be with your 401(k), but you’re not holding significant personal debt, and you will hopefully have a home that will be paid off in time. Plus, you’re not doing that badly compared with the average American with a 401(k) account.
The average 401(k) balance
The average 401(k) balance hovers at around $242,200 for baby boomers (born 1946–1964) and $182,100 for Generation X (born 1965–1980), according to Fidelity, and the average 401(k) retirement balance across all age groups is $127,100.
“Occasionally, retirement savings can also act as a source of emergency funds for non-retirees who face economic hardships,” this Federal Reserve report said. “Some non-retirees who may have a need for a reserve fund to ‘weather’ a hardship may not have retirement savings.”
Some 75% of non-retired adults had at least some retirement savings, but 25% had no retirement savings, the report added. “Among those with retirement savings, these savings were most frequently in defined contribution plans, such as a 401(k) or 403(b),” it said.
Pay off your mortgage and stay out of debt.
Citi Wealth C addressed this very question: what do you do if you only have around $100,000 for retirement? “The reality is that $100,000 in retirement savings is likely not enough to supplement Social Security for a lifetime,” it said.
“It may be adequate to serve as emergency funds for the various larger household expenses that may come up, such as car repairs, household maintenance, property taxes, etc., but there is little room for error,” the bank’s wealth management arm added.
“There will likely not be much left over monthly for entertainment, travel, gifts or many of the other simple pleasures of life,” it said, citing the resurgence in inflation, particularly in food, electricity, heating, household goods and TV streaming services like Netflix NFLX and Hulu DIS .
The simple pleasures of life
I appreciate the overall message of prudence, but I don’t necessarily agree that you have to forego the simple pleasures of life which, in my mind, include cooking at home, enjoying books from the library, long walks, exercise and quality time with family and friends.
Citi Wealth does advise that a retiring household with $100,000 in savings will need to protect the money in safe havens such as high-yield savings accounts, money markets, short-term bank CDs and U.S. Treasury Bills.
“These are low risk, liquid and earn a reasonable rate of interest today,” the bank added. “The interest earned, up to perhaps $4,000 to $5,000 per year, can be used to supplement monthly expenditures.” It does not recommend investing the money in mutual funds or stocks.
You can’t undo the past.
What do you do now? Keep enjoying life, pay off your mortgage, stay out of debt, try to put money aside for an emergency fund, stay on top of your doctor’s appointments and pay the copay rather than say, “It’s probably nothing,” if something does come up.
You can’t undo the past and, not to split hairs, we spend too much energy trying to repair the mistakes of the past. Without a DeLorean and a line tied to a clocktower, we’re out of luck. You can, however, build for your eventual retirement by doing what you’re doing.
You are financially stable and in a secure position to have a modest, happy retirement when the time comes. During the pandemic, I lived out of two suitcases for four months and realized just how little I actually needed in life. It was the biggest takeaway from that time.
Amidst all your looking back and planning for the future, don’t forget to enjoy the present.
Related: ‘My retirement is going to be a disaster’: I’m 59 and have $45,000 in my 401(k). I earn $72,000. Am I doomed?
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com.
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