Question: I am 51 and an independent consultant/writer. Love my work, but it keeps me poor. Due to resolved disability issues, I only entered the job market about 8 years ago. As you can imagine, I have no real retirement savings. I own — nothing! My income has never been higher than 41,000 per year. My question, what can I do at this point to provide any semblance of financial security for myself? Thanks so much for offering any direction possible! Beth, Wichita, KS
Answer: I don’t know if this is of any comfort but your situation isn’t unusual. You have a lot of company. And you’re still young with time to plan. The good news is that you love your work.
In essence, the core of your retirement plan and strategy is to continue working as an independent consultant/writer. Like many people in your circumstances you should plan on working well into the traditional retirement years. This perspective has investment implications, too. The key investments for you as you age are to keep up the skills, education, and networks you need to maintain the flow of work you love. Instead of living off savings earned earlier in your work life you’ll live off the income you make as a consultant.
With a work income you can also afford to wait to apply for Social Security until you’ve reached your full retirement age and possibly even until age 70. You’ll get a higher Social Security benefit by waiting and Social Security eventually will be the financial bedrock of your retirement. Obviously, this strategy depends on your health.
On the financial side, you can prepare for your elder years by largely embracing a frugal lifestyle. I’m betting you’re frugal, and if so, keep a lid on expenses, avoiding debt, and build up some savings. You might want to consider setting up a SEP-IRA and conservatively invest some retirement money. You’ll get a tax break with the SEP since it’s funded with pretax dollars. The real key to savvy savings, however, is to set aside some money every year whether it goes into a taxable account or a tax-deferred retirement plan or both.
What you don’t want to do is take a flyer in an effort to make up for lost time. Odds are the risky investment won’t pan out and you really can’t afford the loss.
One last thought: Where will you live when you’re older? You have plenty of time to mull this question. Nevertheless, now is a good time to start thinking through your desires and realistic choices, especially while you’re healthy. Will you stay where you are now? That’s what most people are choosing today. How about moving to another part of the country? Have you thought about eventually joining a cooperative living environment for aging boomers or one of the other alternative community arrangements that are increasingly popular? Coming up with a strategy for your future home is a vital part of the retirement planning process.
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