Dear MarketWatch, 

I just turned 38 and my husband is 44. We don’t have a company retirement account, or individual one. He’s self employed and my last company didn’t have benefits. My husband cashed out savings (from previous job) for an emergency years ago. I have $15,000 in a retirement account from an old job I left years ago and have not touched it since. 

We regret our lack of retirement savings, though we barely had money to save then.

We always had unexpected expenses throughout the years, on top of regular bills. 

We were able to start saving money just the past 2-3 years. We paid off all our school loans, have no more credit card debt, one car is paid in full (second car we still owe). We’ve saved around $80,000 cash. 

Our home equity is around $400,000 and we still owe $370,000 on that loan. Our mortgage is cheaper than renting in our area, where we want to stay. Home prices are too expensive for us to move elsewhere. We plan to refinance for a lower interest rate. 

A few months ago, I was laid off due to COVID-19 while pregnant. With high costs of child care, the pandemic and baby No. 2 on the way, we decided for me to stay home, instead of working full time, for the next couple of years. My husband’s income can cover the bills, but now we’re back to “not much left over to save.”

What can we do to maximize our current savings? Any advice on what type of retirement plan or savings accounts to open? We want to retire by 60 or 65. Hopefully it’s not too late for us.  

Thank you!

Late start retirement

See: I’m 55, tired of ‘soul-crushing jobs,’ have $1 million invested poorly — can I retire now?

‘We regret our lack of retirement savings, though we barely had money to save then. We always had unexpected expenses throughout the years, on top of regular bills. ‘

Dear Late start retirement, 

The good news first: It’s not too late to start. While the ideal time to begin saving for retirement is in your 20s, for the advantages of compound interest alone, you still have plenty of time before you retire — there’s hope! 

Now the less-than-ideal news: You’re right to be concerned over your lack of retirement savings. Prioritizing retirement savings is imperative, but it’s hard to do that when you’re growing a family, working with one salary and have everyday expenses to pay. So many people struggle with this. You’re not alone. 

To know if you’re truly on track, or not, you’d have to do a more comprehensive analysis, including how much you expect to need in retirement and what sources of income you’ll have in retirement, such as any personal savings, a pension and Social Security. There are a lot of variable factors here, too. I know you mentioned retiring around 60 or 65 years old, but you may decide later on you’d like to keep working in some capacity at that age, or either of you may have to leave the workforce sooner due to unexpected circumstances. This is where working with a financial adviser could really help you — they’ll consider all sorts of possibilities, for good and bad, and work with you to accomplish realistic goals. 

Truth be told, it may be hard to meet the goal of retiring at 60 or 65 — at least comfortably. Again, this depends, but it’s worth at least acknowledging while extra cash flow is tight. For this reason, you may decide to delay your retirement timeline, if only by a few years, so that you have a longer opportunity to save. 

“Waiting to retire has the dual-benefit of both having more time to save, and relying on your savings to pay for your income for fewer years,” said Sean Pearson, a financial adviser at Ameriprise Financial. “Put simply, the last 15 years of your retirement will cost far less than all 25 years, or more, in retirement, especially if you have more time to save for it.”  

Still, there are things you can do now to prepare for the future, if you’re not yet ready to make the decision of when exactly to retire (and who is at this point?) 

Having a figure in mind — a monetary end goal — helps for multiple purposes, including keeping you accountable on this path to retirement. “It is very hard to be motivated for a fuzzy long-term goal,” said Chris Chen, chief executive officer and financial adviser at Insight Financial Strategists. “It’s not enough to know that you need to have money for retirement, you need to know how much money you need to save and invest in order to reach the specific amount that you will need at 65.” 

Stay-at-home moms have tough jobs, and it makes sense why you would want to take this role on in the midst of a pandemic and with such high child care costs. If this is the route you go, keep a cash buffer on hand since you’re not sure when exactly you’ll return to the workforce, said Jennifer Weber, vice president of financial planning at Weber Asset Management. 

Don’t miss: I’m a 32-year-old stay-at-home mom, and my husband earns $150,000 a year. Will I ever be able to enjoy a retirement?

But then invest some of your money. Weber recommends putting a portion of your savings in an individual retirement account now. The max for individuals under 50 years old is $6,000 a year. There are Roth IRAs, which are funded with after-tax dollars and have tax-free distributions, and traditional IRAs, which are funded with pretax dollars but withdrawals are taxed. (The answer on which is best depends on your situation and tax brackets now and at distribution — here’s more on that.) 

To invest in an IRA you must be earning income, but there’s a special rule for married individuals — if one spouse is working, both can contribute to IRAs so long as compensation and eligibility requirements are met and they file a joint tax return. They’re known as “Spousal IRAs.” Under this rule, you both could contribute a total of $12,000 between the two of you a year.  

There are also retirement plans your husband can start for himself as a self-employed individual. The Internal Revenue Service lists a few options here

Finding the dollars to invest can be difficult, especially given your situation, but finding some money to put away will really pay off in the future. For example, if you’re able to save $10,000 a year for the next 20 years, and grow it at a 5% rate, you’d have $350,000 in savings, said Arthur Ebersole, founder and chief executive officer of Ebersole Financial. 

“That, along with Social Security, should allow them to retire, especially if they own their home outright,” he said. “It won’t be glamorous, and they will need to set expectations as such, but it is achievable.” This, of course, is only feasible if you’re still able to pay for your home, utilities, food, child care, any health care and other necessities. 

Also see: I’m a 31-year-old engineer who wants to shift to a lower-paying job one day — what rate of return do I need to sustain my retirement savings?

Here’s what else you should be working on in the meantime if retirement savings is a priority for you: keep your expenses as low as you can while not depriving yourself. First, make sure your expenses are below your income, Chen said. Then, try to get them below your income minus savings needs. 

Also be strategic, said Michelle Buonincontri, a financial coach at New Direction Financial Strategies. Meet as a couple every once in a while to go over the household budget and spending, and devise a method to “stay ahead” of random, unexpected expenses, she said. 

“I love the use of bucketing for multiple savings goals as it creates clarity and accountability when ‘deciding’ to transfer from those accounts for expenditure — rather than swiping a debit card and wondering what happened at the end of the month,” she said. 

Automate your savings too, Buonincontri said. After reviewing your monthly finances — including poring over your recent credit card and bank statements to see how money flows in and out — try to dedicate a portion of your income to your retirement savings goals before even letting it really hit your account, where you’re more likely to see and spend it. 

You’ve got a solid foundation, advisers said. You don’t have consumer debt, you paid off your student loans, said Dennis Nolte, a financial adviser with Seacoast Investment Services. You do have one auto loan and a mortgage — but that also means you have home equity. You have a sizable emergency fund, and understand why you are where you are in your retirement savings journey. Choosing to stay at home to care for the children isn’t just a financial choice, but a quality of life decision as well.  

So I’ll end with this and I hope you keep it in mind — “retirement” is a loose term these days. It’s not what it was even 20 years ago, when you expected to call it quits at 65 and move to a beach. People are completely redefining this phase of life, as well as the journey to it. You may decide later in life you really don’t want to work ever again, or you and your husband might want to take on a moneymaking hobby or a side job that gives you extra cash flow in “retirement.” “There are so many ways to manage your career and family choices,” Pearson said. There are just as many ways to manage ‘retirement.’” 

Have a question about your own retirement savings or where to live in retirement? Email us at HelpMeRetire@marketwatch.com

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