I just turned 50. I have $100,000 saved. Do I have enough saved to retire?
In this episode of Friends Talk Financial Planning, hosts John and Bridget address a viewer's concerns about feeling behind in retirement savings. They discuss whether it's too late to start saving for retirement at age 50, highlighting that having $100,000 saved is a significant accomplishment.
The hosts encourage adopting a positive mindset, emphasizing the importance of celebrating financial milestones rather than focusing solely on what has not been achieved. They outline practical steps for those starting to save later in life, including increasing savings rates—aiming for up to 20% of income—and engaging more actively with personal finances through tracking spending and investing wisely.
John shares calculations showing that with consistent saving and investment, it's possible to accumulate substantial retirement savings over the next 20 years, potentially reaching $1 million or more. They acknowledge that while early retirement may not be feasible for everyone, working longer can enhance financial security.
It's never too late to take control of your financial future and make intentional choices about retirement. Seek advice and take action towards achieving your retirement goals!
Resources:
- Alliance of Comprehensive Planners: https://www.acplanners.org
- John's firm website: https://www.trinfin.com
#ACPMemberWisdom #financialplanning #financialfreedom #retirement #retirementplanning #savings #retirementsavings #savingforretirement #intentionalliving #beintentional
TRANSCRIPT:
John: Once you get to be in your 50s, is it too late to start saving for retirement? That's going to be our topic on today's episode of Friends Talk Financial Planning. Hi, I'm John Scherer and I run a fee-only financial planning practice in Middleton, Wisconsin.
Bridget: And I'm Bridget Sullivan Mermel. I've got a fee-only and financial planning practice in Chicago, Illinois. John, before we start talking about retirement at 50, let's ask people to subscribe. It helps us get found on YouTube and helps everybody see our content. Okay, John, let's talk about starting to save for retirement at 50.
John: Yeah, it’s a great topic. We had a viewer who wrote in with a question. And we'll kind of round up the numbers to make it reasonable. But basically, I'm 50. I really haven't done a lot of saving for retirement. I make about $100,000 a year, and I've got about $100,000 saved up for retirement. And I'm just scared that I'm so far behind that I'll never catch up. It sort of feels hopeless. And first of all, we love hearing from viewers, talking about what's going on, what things can be meaningful. And so, I thought we'd just take that conversation and sort of dig in. What are the numbers behind this? Does it work? And spoiler alert, it's not a hopeless situation. This can work out really well with some modifications. And I thought we'd talk about what it looks like and how to think about this.
Bridget: Yeah. The first thing I would say is stop beating yourself up. You've got a hundred grand. Let's talk about the skills required to have $100,000 saved. This is generally a multiyear endeavor. It probably took at least 10 years to get $100,000. And so, you've probably been saving for at least a decade. And that means that you haven't been spending as much as you've been saving, or your saving and spending have been balanced. So I think that people can see that that's actually an accomplishment and probably more than a vast majority of Americans have.
John: Right. I love that idea. The tendency is to think what's wrong? How can we fix things? Whoa, hang on a second there, you saved up a hundred grand. That's not zero. I mean that's significant. And it's worth celebrating those things. It's so easy for me to beat myself up. I wish I had this much, or I should have done better. No, hang on a second. You did some good things. Now how can we improve it going forward?
Bridget: When I was in high school, I had a poster in my room that said, “I'm so far behind I think I'm first.” Stop thinking about the people who are way up there and start thinking about the good things where you’re at. Look at what I'm doing. I'm actually ahead of a lot of other people.
John: Yeah.
Bridget: It’s easy for me to see my sibling or this or that person who has more than me, but actually appreciate that you're doing okay.
John: Absolutely. It’s so easy to make those comparisons when you see what other people are doing or what you think they're doing. Sometimes it's not even what they're actually doing, but what you feel about things. But let's maybe put some context around things. I'm 50 and earning $100,000, not saving a whole lot, or not saving what I feel I should be saving. And the reality is, yep, you're going to have to save some money. And when we like to talk about this with younger folks, we say if you start in your 20s, you got to save 10% of your income, and you're going to be okay. You get into your 30s, 40s, it's 15%.
You probably have to start thinking about working up towards having 20% of your income going into savings. There are some changes that need to be made. But I went and just put together some numbers for the exact scenario of our viewer and said, what will happen in 10 years? What will happen in 20 years? And the reality is that retiring at 57 or 62 when you've only saved up one times your income is probably not on the books for you. Some of those things that maybe you wanted to have might not work out. But as you look out towards 65 or 67 or 70, the prognosis looks a lot better. And so, I just put together a calculation and said, listen, we start with $100,000 today.
If I save 10% of my income, so starting with $10,000 and going up with inflation, and I invest it over the next 20 years, so I target age 70 as retirement age, depending on the on the interest rate that you use, you end up with like $1 million, million and a half dollars, something like that in your retirement savings. And if you can save 20% of your income, which would be an ideal situation, you end up with close to $2 million. And of course, none of these are guarantees, but the reality is that over a 10-, 15- or 20-year period, if you put some money to work and build on what you've already started, you're going to be a millionaire.
And so, it might not be exactly how you pictured it when you started your career. But where you are right now, you can have a really nice retirement when you get into a spot where you've got a million, million and a half, $2 million of spendable money. But then remember, the farther along you go into your 60s and into your 70s, number one, you've got less time to spend that money. Think about it. Let’s say we're going to live till 90. If you retire at 60, that's 30 years you've got to save it for and live off your savings. If you can work until you're 70 now, it's only 20 years, you've just cut the dollars that you need, the amount of cash flow, by a third. That’s really significant. And then Social Security goes up the longer you wait. At 70, Social Security is probably paying you something in the $50,000 range. Hey, we're starting to get there with those things.
Bridget: Yeah, absolutely. So you've got a bunch of levers that you still can pull. But here's my point. It's great that you looked at a video that was legit. I mean, we're just trying to help people. We’re not trying to do anything else with our videos. And so, engagement is going to be one of the things that you want to change. It's not just savings, but it's also saying I want to engage a little bit more in my finances, both in asking how much am I spending and just tracking it. You don’t have to do anything, just track it. What am I spending money on?
That way you're spending the money on the things that you want to spend money on. And then, again, looking at the investing part a little bit, maybe how your 401(k) is invested, making sure that these things that you probably know you should do, you're doing. And find some writers, podcasters, people like us who you are listening to, who you feel like are giving you solid, practical advice that you can follow. Again, just get a little bit more engaged.
John: Yeah. And the action part of it is such a big deal. You’ve done some good things to get to $100,000. It's not insignificant. But then we need to do more of those good things. I mean, the reality, can you save more? And I love that you brought up the budgeting versus tracking. It’s not budgeting. Here's what I'm going to spend next year. But what have I been spending? That's a really great thing that we talk about with folks that come into our office. If that person were to stop in the office and say, hey, I need some help. Well, what have you been spending? What're the dollars out the door? We talk with folks about looking back at their checking account statements or credit card statements, and not necessarily where the money went, but how much went out the door.
It's hard to argue with the money that went out of your checking account to pay the credit card bill and the mortgage and all those other things that you have to pay. That's what we're spending. And then as you just said, Bridget, how do you feel about that? Are you being intentional? Are you spending the money in the right places? And then there might come a time where you have to make some hard decisions and go, yeah, here's where the money's going. And geez, we do need to dig into the individual line items. Golly, we got to cut back on some of those things in order to be able to save more.
There’s another thing about this idea of asking can I get to retirement? And I totally respect this person for writing in and just asking on this, because it feels hopeless. I don't know if they use the word hopeless or pointless or they sound like, oh, man, I screwed it up, I can't fix it. No, hang on a second. You're on track to be a millionaire, as we just talked about. You can still be on track to do that, but then the other thing comes down to these choices, like I'd really like to retire at 60. Yeah, that one's probably not going to be able to get there. It's probably going to be 65 or 67 or 70.
Bridget: Or if you retire at 60, then you're going to be reducing your circumstances from your $100,000 lifestyle.
John: Yeah.
Bridget: But that's probably not an issue if you live in a rural town.
John: That’s exactly where I was thinking on this one, Bridget. If you want to live in Chicago or in Madison, two pretty high cost of living cities…
Bridget: New York or San Francisco.
John: Yeah, that doesn't work. If you want to go to northern Wisconsin. Spooner Wisconsin's a beautiful place. Golly, the cost of living is a lot less up there. Maybe instead of your $100,000 lifestyle, you only need to live on $70,000 or $60,000. And especially coming from a city like Chicago, you might go, hey, wait a minute, I don't want to live in northern Wisconsin. Well, great, that's a choice. It's not that you can't do some of those things. I don't want to. That’s totally legitimate, but then what are the other levers? Oh, I want to do this. Maybe I have to work until I'm 75. It's these tradeoffs, but it's not, I have no control. It's not, I have no chance. No, we can get there. And then it's, well, how do you feel about this? And how can you be intentional about your choices?
Bridget: Yeah, and I want to applaud the people who have written in and said that they're afraid, they're terrified, etc., because that to me is a sign of courage. That's a sign of doing something. I'm more engaged. So that's one of the things that I admire. It’s not easy to write that kind of deep stuff on YouTube.
John: We can get into a whole other discussion. I'm really good at the at the numbers. No, you're on track to be a millionaire. Then there's the whole emotional side. So maybe the takeaway from our episode here is hey guys, the ship hasn't sailed. You can do this. Maybe there's another episode where we talk about how do you do this? How do you get your mind in that position where you can be strong and be able to address those issues? But the takeaway for me here is, hey, you're in your 50s. You feel like you’re not where you want to be or should be. It’s not too late. There're things you can do. You can be engaged, you can take action, you can get to retirement.
Bridget: Yes, exactly. And you can enjoy yourself.
John: That's right.
Bridget: Let's wrap it up. I'm Bridget Sullivan Mermel. I've got a fee-only financial planning practice in Chicago, Illinois.
John: And I'm John Scherer. I've got a fee-only financial planning practice in Middleton, Wisconsin. And both Bridget and I are taking new clients. We'd love to talk to you if you're interested in finding and working with firms like ours. But we're also members of the Alliance of Comprehensive Planners, which is a nationwide group of fee-only, tax focused planners. If you like what you hear on our show and would like to talk to somebody else who has a similar philosophy and you want to find an advisor in your area, you can check out acplanners.org.
Bridget: And don't forget to subscribe.
At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.
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