Financial Planning for Generation X & Y Women
 
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Expert Q&A Archive

03/27/2008
What is the best way to play "catch up" if you have no savings?
What is the best way to play "catch up" if you are 55 and have no savings due to health problems?
Delores Lenzy - Jones, CPA, CIA:
expert info »
What is the best way to play "catch up" if you are 55 and have no savings due to health problems? My recommendation to you would be to start small. Try saving $25.00 per month. For example, for me I have several indulgences I can do without during the month i.e. drinking
coffee every day or eating out for lunch. For example, I like to drink a cup of coffee each day, which costs $2.37 per cup. If I gave up that coffee for one week, I would save $11.85 per week and over $40 per month. Of course, I don't recommend going cold turkey. Try giving up some small things and build to the bigger ones.

Also, to the extent your company offers tax deferred programs, I recommend that you take advantage of them. You're investing in your future without being taxed.

You really need to ask yourself how committed you are to "catching up" because it will take some sacrifices ST for LT gains. I will share a personal story with you. About two years after college I had racked up about $10K worth of credit card debt. I always paid my $20 minimum
payment amounts, but that was an infinite credit card debt loop. I began making those small sacrifices, and when I got my IRS refund checks I slowly extinguished my debt. It meant making some sacrifices, but in the end I am debt free--with the exception of our mortgage -- for over 20 years. You can do the same thing with saving and investing!
Sharon P. Hardy, CFE:
expert info »
I believe that it is never too late to try to save something. In saying this, I would take every opportunity to seek out the advice of a financial planner to determine the best course of action to take. More times than none, such advice from professionals in this area can be obtained at little or no cost, through fee seminars, workshops, Internet, library, etc. Sometimes, all it takes to obtain such advice is just using:
a) A little bit of "elbow grease";
b) The willingness to do the research to determine what and where those sources are; and
c) Last, but equally important, patience.
Rosemary Ervin, CPA:
expert info »
The best way to catch up is to contribute to a retirement plan. If you have a 401(k) or another [tax] deferred plan, contribute the maximum. Depending on your earned income, you can contribute an extra $5,000 to your 401(k) if your employer offers the plan. You can also contribute an extra $1,000 to an IRA for a total contribution of $5,000. Absent information about your W-2, there are some generic recommendations.

Save systemically, have your paycheck direct deposited into your checking account, but also set up a second direct deposit, a savings account, and request that an amount (say $100 a paycheck) go there. That would give you $1,200 a year until you retire. It is not tax-deferred,
as it would be in a retirement account, but if you have contributed the maximum to your 401(k) and IRA, it is an additional way of spending less than you earn.

Never use a credit card to pay medical bills. Ask them if you can make payments monthly directly to them. Once you give them a credit card, you are paying more than just medical expenses.
Gary Silverman, CFP:
expert info »
This is both simple and hard. There are two steps:
1) Reduce expenses as much as feasible; and
2) Save and invest every dime you can.

What you are trying to do is make it so that your standard of living before and after retirement look about the same. To accomplish this, you'll want to do some rudimentary retirement planning to see just what your income and expenses will look like in retirement.

Of course, before worrying about retirement, you'll want to make sure you have budgeted in savings. You'll need to replace cars periodically, repair the house, handle insurance deductibles, etc. Add to this an emergency fund, and you'll see that the first many months may just be going to these areas.

The money you save for retirement purposes will need to be invested. From a technical standpoint, this means you'll want somewhere between 50 to 80% of your money in equities [stocks]. However, before you jump in, make sure you can stomach the risk that goes along with these investments. The last thing you'll want to do is watch your investments go down, panic and sell, and then see the markets go back up.

Don't get involved in some speculative investment or get-rich-quick idea. Investing is slow, steady plodding along, periodically interrupted by wild up or downswings of the market. So either self-educate (try the web sites of Vanguard, Fidelity, or T. Rowe Price for a start) or hire someone to help (which unfortunately costs you some of that money).
Michael A. Masiello:
expert info »
This is a tough one, not much info to go on. Assuming you are now working full time, best thing to do is to save as much as possible in co's 401k' or other retirement plan, if eligible possibly an IRA or ROTH-IRA as well. With 10 yr's to go, there are no silver bullets. Best to save as much as possible in multiple type accounts. Good luck.
Julie Ann Johnson:
expert info »
A Shadow Career is your best chance at playing catch up! Find one where you can create a real business interest that will create residual income, such as franchise opportunities, professional
agencies like insurance, mortgage or real estate, etc. We ALL need a "Plan B" career anyway, with so much job insecurity in the work force; all of us would be well advised to seek out a second "shadow career"...!
Connie K. Marmet:
expert info »
You can make annual catch up contributions to your 401(k) if your employer has one.