Age 63 and No Retirement Savings - What's the Plan?

See this scenario a lot. I'm 63 years old. I don't have anything saved for retirement yet. Is it too late to start saving? And what's my plan? Oh, from a financial planning perspective, I can help. I've got that and more coming up. My name is Mike Bernard. I'm the host of the Wise Money Show. I'm also one of the certified financial planners right here at Core Horn Financial Group. Make sure you hit that subscribe button, turn on notifications, and smash that thumbs up button. Early in my career, I saw a client actually cut out a comic from the newspaper. Remember what those things are? And it made its way around the KFG office, which was like six of us at the time. And it was an individual at a desk sitting across from another individual, and it says, I haven't saved anything for retirement, and, or I haven't saved anything, and I'm retiring on Monday. Here's your chance to become a legend. Something like that, okay? And I thought that was pretty funny. But, you know, in reality, life comes at you fast. And there's a lot of things that can come up where you meant to save, and it got pushed off, and then you did save, and then an emergency happened, and then, you know, some other curve ball threw at you, and then all of a sudden, you get later in your career, and you realize, I don't have much saved, or I don't have anything saved. And this is a fairly common scenario, and it's not an excuse to not see a certified financial planner, but I would tell you, this is the exact reason why you need to go see a certified financial planner who's doing comprehensive financial planning, because someone that's just trying to sell you an investment, they don't care. They're not doing planning. They're not trying to help you reach your financial goals or help you navigate this financial situation. They just wanna sell something. That's not your CFP. That's not someone doing comprehensive financial planning. But the idea, this happens all the time, and recently saw an article about sort of this, you know, ask an advisor that was this very thing. I'm 63 years old. I have nothing saved. Is it too late to start saving was sort of the question. I read through how the author then answered the question, not terrible. However, it wasn't a financial planning perspective, and so I wanted to answer that question with you here and kind of talk through some of the things that you need to be aware of. Number one, it's never too late to start saving, but I wouldn't start there. We think of, and traditionally, we look at retirement as a saving problem. No, it's a five-factor problem, right? Okay, that doesn't sound good, but it's not just a here's how much I have saved up problem. That's one of five factors. You're trying to retire. You're 63. You don't have anything saved up. You need to look at all five of those factors, the age at which you can, you know, you wanna be done. Now, you might wanna be done at 63 or 64, but reality is if you don't have that much saved up, you're probably looking at retiring in your late 60s or at 70, so age is the first one. Second is how much you're spending, and we're actually gonna start there here in just a second. So how much do you spend? What's your lifestyle? How much will Medicare be? What's our inflation rates? Those sorts of things, so second is spending. Third is your income source, okay? We're gonna talk about that one early as well. Fourth is the one that he focused on, he or she focused on, and that is savings. How much do you have saved up? And I'm not saying that that's not important. It's critically important, but for this scenario, that's not where you would start. And lastly is how much risk can you take? So the dollars that you have saved up, how much volatility will you see or are you comfortable experiencing? And then what's the long-term return on those dollars? So those are the five factors. This isn't a savings problem per se. You've gotta look at all five factors. So therefore, where I would start after looking at those five factors is I'd start with how much are you spending? And how much are you spending? I would, at 63, I'd say, what's your take-home income? And then where's that money going? What's your take-home income? Where's that money going? I would build that budget because when you retire, most people, they used to call it the three-legged stool. And so to transition away from your paycheck, you've got your pension income, you've got your social security income, and then you've got your investment income. That's a three-legged stool. That's sturdy. You can sit on that. Well, pensions are gone. And social security, by the way, is in the penalty box. Some change is coming at some point in the future. There's obviously uncertainty surrounding that. So, but we also, so we assume this person doesn't have a pension and we also know they don't have investment savings either. So social security is going to be it. So that's the thing. I would first build that budget. What's your regular monthly take-home income? And then where's the money going? So you can see all the fixed obligations, debt and mortgage and all that sort of stuff. And then, you know, shopping and groceries, all your variable expenses. So what's the take-home income? And then where's it going? And then I would, I would then look at your income sources in retirement, which is primarily going to be social security. And I would look and see right now the new social security statements, if you're a certain age and whatnot, they're going to tell you what your level, what your social security level would be by age. So I would look at your full retirement age. I would start there because if you're 63 and you don't have anything saved up, my guess is you're going to need to work until your full retirement age, okay? Which would be 67. I would look to see what's your social security at 67, 68, 69 and 70, okay? Knowing those two numbers, I would then look to see if we've got a match. Do we have a match between your take-home income and what your social security would be at 67, 68, 69 or 70? I would doubt that you'll have a match at age 67. You might get really close at age 70. And therefore, all of a sudden, you might not have a saving problem. You might just need to make sure that you're maintaining that standard or that lifestyle. That might also reveal, well, my take-home, okay, is 3,500 a month, but I've got 1,000 going towards debt. And so I really spend 2,500 a month. And yeah, my social security at age 69 is gonna be 2,500 a month. So if I could only get rid of this debt, well, then there's your clue, right? And you can work with your certified financial planner. Okay, how do we get out from under that debt before retirement? Do whatever you can, sacrifice, make cuts, make adjustments, do whatever you can to free up that debt of $1,000 or whatever it is in your scenario so that you actually can get down to, here's my real standard of living and baseline lifestyle expenses. And that lines up with social security. All right, so when you've done that math, when you've looked and said, all right, well, here's my take-home, and then I've done the budget to see these are all, this is where I'm spending the money, and I've kind of figured out a plan to get rid of the debt. And I've compared that to what my retirement income is going to be. Most likely, you're going to see that your income is higher than your social security at, you know, drawing at age 69 or age 70 or age 67, something like that. Your income, your take-home income is going to be higher than that because that's how that works. Social security isn't intended to replace 100% of your income, okay? So then working with your advisor, you're going to say, well, what would you need to do to adjust your lifestyle down right now? Because you're going to need to do that when you retire anyway. Adjust your lifestyle down right now so you're spending just what you'd be receiving in social security. So if you know, hey, without doing anything, when you retire, you're going to have to shift to this lifestyle, shift to it now, have the pain now. And then that means forcing yourself to spend below what you make. Now, all of a sudden, you have extra cash to pay off that debt to make sure that your spending is within a certain level, or you can start building up a savings account, a nest egg to supplement that social security in retirement when you have a one-time lump sum expense. You're not going to be able to build up so much in retirement savings that now, in addition to your social security, you're going to have 500 a month in investment income. It's not going to be enough. There's not enough time for that, unfortunately. But you would, you hopefully would be able to build up enough so that you're living on social security and then all of a sudden there's a car repair. Okay, I've got some resources for that. Or yeah, it's time for that next vehicle. Well, I've got some resources to help with that. So I've got a smaller loan, something like that. So that's where I would start. So it certainly is a savings, you've got to be aware of how much can you save, how much should you save between 63 and whenever your retirement is. You got to start with building out that five factors. And I would take a look with your financial advisor and look at each one of those. Okay, if I retired at full retirement age, 67, here's what it'd look like. 68, here's what it'd look like. 69, here's what it'd look like. 70, this is what it would look like. Okay, and then I would build out that budget and I would compare that to your social security at those different ages. Of course, if you can find a way to have even more income early in retirement or in retirement, be a part-time job, something like that, that makes things even better. But that doesn't, that alone isn't a substitute for that comprehensive and five-factor financial and retirement plan that you need to build. Work with your certified financial planner if that's your scenario, okay? They're gonna walk through those five factors. They're gonna give you the, you know, they're gonna have that hard conversation of, yeah, probably retiring at 65 is not gonna be possible for you. You're gonna need to work until 67 at the earliest, but then walk through and help you take a planful approach in deciding when you're able to retire and how to optimize social security. So work with your CFP. If you don't have a CFP on your team, you can contact one on my team. Find us online, Corhorn.com. That's Corhorn with Kate, wisemoneyshow.com. You can find us there as well or send us an email, info at corhorn.com. All right, there you have it. Go out and take your next wise step in your financial life.