I’m 40, In Debt, and Haven’t Saved for Retirement: What to do When It Feels too Late

If you’ve been reading the blog for a while, you’ll know that I’ve been paying down some debt that I accrued in my early to late twenties in the form of credit cards and student loans. I’ve recently paid off my credit cards, and have been going pretty hard on my student loans. I’ve been following the Dave Ramsey “Baby Steps” to pay down my debt, and have been really excited with the results. Also, as a side note, these are only my experiences in researching what I need to do to retire. I am in no way a specialist in the financial field so this should only be taken as a rough guide to start asking questions. Speaking with a qualified financial advisor is the best way to get sound financial advise. So don’t take this article as the final word on investing.

Along with paying down my credit card debt, I’ve learned how to write and follow a budget, while also learning how to care for my financial needs. I have some money in savings for the first time in my life and am making some serious progress on my student loan debt. I’ve been so excited making so much progress on paying down my debt, that I completely overlooked that I’ll be paying into retirement a little bit later than most people usually start. This has me a little worried about what my future is going to look like for sure. So I started doing some research on the subject, but I first had to look at what got me here in the first place.

Planning for the Future by Looking at the Past

When I first got into debt, I had no idea what I was doing when it came to finances. Much in the same ways I knew not how to care and tend to my nutritional needs, finance was another area in which I was illiterate. I was living paycheck to paycheck for most of my adult life, and as soon as I was able to borrow money, I jumped at the chance. Looking back now, I’m not sure what the draw was. I was constantly in debt, all my credit cards were maxed out and I was missing payments and paying hefty fees for it.

But there was something about it that had me hooked. I was buying things I didn’t need, and using somebody else’s money to do it. And when it came time to pay for college, I treated student loans much in the same way I was treating my credit cards. They offered me the maximum payout amount, and I took it each time. I didn’t realize that I could accept only what I needed from the loans, and not the entire sum. But the way I was living, I don’t think I would have chose differently had I known.

I was accumulating so much debt, that I could almost have bought a small house in Western Massachusetts with the amount of loans and credit card debt I had. But I kept spending. And hadn’t even thought about what I was going to do when it came time to retire. So when I finally took financial responsibility for my life for the first time in my early thirties, the outlook for my future was sobering.

I’m Paying Down My Debt Now, But What Do I Do About My Future?

I’m about a little less than halfway through my debt currently, and the idea of being forty, and just beginning to think about retirement, almost had me in panic mode. But here is where it is important to stay in control of your emotional world, and know that just because you’re starting late, doesn’t mean that you are destined to be poor in your old age. You have options.

The first thing I did was to come up with a date that I would be debt free. I’ve done this a few times, and it’s important to stay fluid while you go over your numbers. Surprises will come up, and you will be met with setbacks. But finding your debt free date not only gives you a tangible goal to achieve, but also helps to keep you accountable for your progress. For me, I had a few setbacks. I had to buy a new car, and my pay fluctuated a few times when I changed jobs.

But each time a new challenge arose, I met it by reassessing where I was, what my new circumstances were, and adjusted from there. The one thing that kept me on track was staying persistent. And the closer I came to paying down my high interest debt, the closer I’ve come to saving for my retirement. This is one of the main takeaways of Dave Ramsey’s baby steps. The less high interest debt you have, the more prepared you will be for saving for your retirement.

So when you’re finished paying interest on top of the money you owe, you’ll be able to save more money, and invest more later on. That’s why it’s so important to pay down your high interest debt first, to free up your capital for your future. So in a way, paying down debt is kind of like investing in your future in that you will be the beneficiary of your hard work, not a credit card company or bank.

I’ve Paid Down My Debt, What Next?

After you’ve paid down your debt, take a deep breath, and appreciate what you’ve just achieved for yourself and your future. This is a huge step in reaching your financial independence. The next step, according to Dave Ramsey, is to set up an emergency fund. This is usually 3 to 6 months pay.

Being in debt for so long, I’m opting for the 6 month fund. Feeling financial secure is important to me, especially if you’ve been living paycheck to paycheck for most of your working life as I had. It’s also part of the Ramsey baby steps to have a thousand dollar emergency fund while you’re paying down your debt. Just in case something comes up that you haven’t planned for. It’s not much, but when you’re 95k in debt like I was, and you suddenly get hit with a five hundred dollar medical bill and you’re living paycheck to paycheck, that emergency fund is the difference between talking the hit in your budget somewhere else and feeling secure in knowing you can take care of the small problems that come up along the way. Life happens, best to be prepared when it does.

After your emergency fund is set up, now it’s time to start looking towards investing for your retirement. The usual routes for this is through traditional IRAs and Roth IRAs. The difference between the two accounts are, traditional IRAs are taxed when you take your money out as opposed to Roths, where you are taxed when you put your money in.

Roths vs Traditional IRAs
Roths

From what research I’ve done, an important aspect of saving for retirement is the tax advantage you get when you decide to take your money out. If you know you are going to be in a higher tax bracket in retirement, for example say you will have a lot of passive income such as rental properties in retirement, something I’ll be going over later in this article, you may want to be taxed when you put your money into the account. Using a Roth IRA, you will have been taxed when you’re rate was lower, saving you money by paying less in taxes.

Traditional

But if you plan on being in a lower income bracket when you retire, a traditional IRA may be the way to go. This way you’re contribution is taxed when you receive your payments. This also has the advantage of letting your money grow tax free and with compounded interest. So you’ll earn more with your investments. Whichever path you choose, it’s best to have a plan for what your life may look like when you start pulling money out in retirement.

Savings Vehicles

How much should we contribute to our funds, once we set them up? Conventional wisdom suggests that we sock away between 15 and 20 percent of our income a year. So depending on what you are making and your savings vehicle, you may have to spread your savings out, because you are only able to contribute so much to a traditional or Roth IRA.

As of 2021, the limits are 6,000$ for each fund and 7,000$ for those over 50 years of age. And with 6,000$ a year, if you start at age 40, that could translate to a little less that 475,000$ by age 65. That is a huge improvement over receiving social security alone. For a more indepth look at how IRAs work, check out this article on investopedia that covers the essentials.

But if 6,000$ is less than 20% of your income, your going to need to find ways to diversify your retirement savings. This could be in funds, such as mutual funds, money market funds, real-estate or physicals. These are only a few options available but worth looking into.

Mutual and Money Market Funds

These types of funds are considered low risk investments. Mutual funds are a group of securities that are managed by investor professionals. They consist of things such as, stocks, bonds and securities. This vehicle is made possible for the individual by pooling together funds from many investors. As I said above, they are considered low risk so they are a great way to pad your retirement if you have more than the maximum IRA contribution to squirrel away.

Money market funds are investments in low risk security funds. So they don’t have the highest percent interest payout, but they are solid supplements to your retirement fund. They are however not backed by the FDIC so it’s best to research funds with a history of promising returns. Slow and steady is the end goal for mutual funds.

Real-Estate

There are a few ways to invest in real-estate. One way is by flipping homes as seen by Chip and Joanna Gains on “Fixer Upper”. But another way, and the one I’ll be talking about is, by buying rental properties. With rental properties, you’re able to purchase a home or apartment building and rent out the units. The idea is to have the rent paid by your tenants, used to pay off the mortgage. Then once you’ve paid for you property in full, the rent becomes income. If you’re able to pay off the mortgage before you collect your IRA, you’ll have a consistent stream of income coming in after you finish with your career.

There is a lot to consider though, when taking on a rental property. You’re responsible for the general maintenance and upkeep of the property. For finding tenants to occupying the building and taking care of any issues that may arise. It can be a large responsibility so it’s worth considering how much time you have to invest in this strategy. But if done right, could definitely be beneficial during your retirement years.

Physicals

What I mean by physicals is, gold, silver, copper or platinum. My father was in the jewelry and coin industry, so this is something I’ve heard a lot about growing up. It can be daunting, looking into investing in something like gold. The average price per ounce of gold, as of this article’s publishing is, around 1,900$ an ounce. With bullion being sold most commonly in ten ounce bars, according to Forbes Adviser, this can end up becoming a costly investment.

Luckily, there are some more accessible ways to invest in gold. Gold coins are one way to squirrel some money away for retirement. The American gold eagle is sold as a half ounce to an ounce, and is sold at market value. This is a great way to put up 1,000$ at a time, while also getting you closer to your retirement goals. It’s also worth noting that if you spend over a thousand in physicals, the purchase is tax exempt. So an ounce of gold is the cheapest way to buy into this market.

Here are only a few options if you’re looking into retirement a little late in the game. It may take some time and planning, but it will literally pay off in and for your future. So don’t panic and don’t give up hope. The way to retirement may seem difficult now. But with some persistence, your efforts will carry you comfortably into your golden years. Peace, and thanks for reading : )

Image Credits: “Retirement Jar” by aag_photos is licensed under CC BY-SA 2.0

Living Your Life: School and Career Focused

School and work. These are two subjects I knew absolutely nothing about. This area of my life was in complete disarray, and with zero guidance due to my complete lack of positive role models, any kind, I had quickly made the transition from cute kid in grade school developing normally, to almost a middle school dropout. And there was no shortage of people helping me along the way to achieve as little as possible. In this post I’ll be going over; the experience I had with my education and how I never learned how to find out what my passions are, how I dealt with the lack of role models, how I stumbled along the way, to me finally coming to an understanding of what career means to me and what I’m doing about it now that I’m behind the wheel and steering my life in a direction that works for me. Hopefully if you’ve experienced any of what I have, you’ll at least know you’re not alone and maybe get some helpful pointers along the way. Let’s start at the beginning of my schooling.

I hadn’t realized at the time, but my disinterest in school started soon after the trauma I experienced, which was between second and third grade. I was doing well until third grade, and it was then that I started showing signs of having difficulty learning to read. I had mild dyslexia, confusing bs for ds, and my overall progress slowed. I overcame the mild learning issues in elementary school, but when it came to middle school, I had completely checked out.

I was in a constant state of fear. Everything I had known about feeling safety and belonging with and around others had flown completely out the window. I was nervous and anxious around people almost constantly. I hadn’t developed any social skills in my early teen years and when I hit high school, I was modeling myself after Jim Morrison. I was overcompensating for my fear of connection by being arrogant and aloof like Jim and this is also when I started drinking and smoking cigarettes. My ambition in life was to be seen by others as someone who was cool. That was it. There was no substance or desire for something more, and I had no idea that these things mattered or even existed. My end goal was to be liked.

This makes me sad now to think about it. I was totally cliche in thinking that if I acted a certain way, I would be accepted and liked by others. It was that simple, what I was going through, and I had no idea that I was even going through it. But of course, if you don’t feel accepted by your caregivers, then who is there to tell you that you belong? For me it was just doing whatever felt good at the time, with whomever was around me probably making the same poor choices. I really felt a sense of homelessness, with no sense of belonging or what it means to belong in a healthy sense of the term. I spent most of my time with friends, drinking way too much alcohol and wandering around aimlessly from one good time to the next. I’m surprised I made it out of adulescentes relatively unscathed. But I did, and I managed to pull a life together too in spite of the adversity I encountered along the way. Though at the time I hadn’t realized how lucky I truly was until I had sabotaged myself.

I say I had pulled a life together, but that was in the loose sense of the term. I may have had a place to live, was in a stable relationship and had plans for the future, but I was really just winging it and was still trying to avoid feeling the uncomfortable, and sometimes traumatic emotions of my past. I also had little to no drive or ambition and spent most of my time avoiding living my life by either drinking or playing video games or both. My future plans felt more like stabs in the dark with nothing to back my efforts and I still had no healthy role models or direction to achieve my goals. I was just drifting, the way I had through my teen years. Only older now and with almost nothing to show for the life I had been avoiding living.

But then something shifted for me. My comfortable and somewhat stagnant life was turned upside-down when I thought I had fallen in love with another woman. Looking back now, I realize I had finally felt as though I could feel heard from all that I had been keeping inside. But I was only recognizing that the woman who I thought I fell in love with was really a reflection of how I felt. Like that Justin Timberlake song, “Mirror”. She was my “mirror”, allowing myself to finally feel what I was covering over for so long with alcohol and anger. The small, vulnerable child that was still waiting to be heard. I ended up quitting drinking while I was with the woman I thought I loved and it helped a great deal towards bringing some order to my chaotic emotional world. But this is also where I had sabotaged myself, leaving the life I had, and could have worked on for the image of the life I eventually realized I was outgrowing.

We had split up shortly after we got together, for the best, but I continued on the trajectory of finding greater focus in my life. During the time I had been drifting through life, I had started school for social work, switched to architecture school, then to journalism. I had no idea what to do with any of this schooling, but felt as though I needed to go. While I was getting my life back together, I finished my degree, this time as an English major and the only take away from my college education was how to write a blog 🙂 So I had something to work with.

But even after I finished my undergrad, I was still a drift with no direction for how my future was going to unfold. Still unsatisfied with my employment prospects and jobs, I decided that something needed to change, but again, with no direction or role models, I was in the same place as I was when I was just winging it. So, I did what I knew. For me this was baking, running, yoga, writing this blog and journaling, building up and nurturing my relationships and paying off debt.

This may seem like a bunch of mish-mash items all jumbled together, but what I came to realize was, that while I was cobbling back together the pieces of my life that had been a drift via the above areas, I began to find greater focus in all areas of my life. I’ve been baking professionally for some time now, off and on throughout my working life. I’ve come to enjoy the process of baking. I’m good at it and it’s something that’s been consistent in my life. But I know now that I don’t want that to be the focus of my career.

I have, however, learned how to hone a craft. As I’ve said above, I’m pretty good at baking, which is no surprise considering how long I’ve been doing it for. But I also have been able to recognize how I’ve build my craft, and how it’s changed over the years. I can tell things about dough just by looking at it or touching it, and have a large index of knowledge to work from, in my personal and professional life. But I’ve also come to realize that baking is not my end goal. It’s something I’m grateful I’ve learned, but also something I’ll be able to part with when the time comes.

Running and yoga have helped me to manage my physical self. I’ve gone through some considerable changes, regarding my weight, physical appearance and overall health thanks to these healthy habits. They’ve also taught me something about dedication. About getting out on the road and pounding out those three miles, even when the temperature is in the low nineties and the humidity is high. Or finding your balance when you flow through your vinyasa to down dog and bring your right foot up to high lunge. When you do them consistently, you build more than just physical strength. You’re building resilience in all areas of your life. You have that extra surge of energy that helps you to get up and do the dishes. Or to get moving at 5am before you’ve had your first cup of tea or coffee.

Writing has been essential in finding and maintaining focus for me as well. First with bullet journaling, something I’ve mentioned before on this blog. Journaling has been a way for me to map out and organize what I have in my head, and put it on paper or a screen. This way I can give myself some distance from my thoughts, find out what the steps are that need to be done, curate some order for the tasks and make a plan to do them.

And the same is true for this blog. Through this blog, I’ve come to understand where my interests lie and how they come together to give me a sense of who I’ve become and of who I want to be. The parts of my life, the personal experiences and how they’ve come to shape the ways I see things and who I’m becoming, has given me some focus and direction as to where I want to put my efforts and energies. Environmental issues and helping those that have been in similar situations as myself being a few of my passions that are on my list.

Building and nurturing my close relationships has given me a great deal of perspective on how I want to be living my life. Before, relationships were something to be feared. I was persistently unaware of where I stood in my relationships with others. Always keeping them at a distance or numbing my feelings so I wouldn’t feel the pain of being rejected by them. Something I was all too familiar with growing up.

Now, relationships are sources of comfort, strength and happiness for me. I feel more secure in relationship now, and now that I know that it’s possible to make the shift from numb and alone, to supported and loved, I want to help others find their path to their connectedness. When I was going to school for social work, I also worked at a residential program for at risk adolescence. This was difficult work, but it also gave me the opportunity to help others whom were in a similar situation as I was.

I’ve recently picked up a second job at a family shelter, that has elements that reminds me of the adolescence residential, but with much less unchecked emotions. This has given me a chance to help pay down some student loans, but also to realign myself with the types of work I want to be doing. Helping people bring their lives back together after what seems like such a hopeless situation, that of being homeless. It’s in these moments, of not so much being the change, but being a part of the support that helps them to change their situation, that makes me feel like I’m helping, by being a part of it.

Paying down student loans has been a huge source of inspiration for me in finding my focus as well. I started out paying down credit cards, but eventually moved on to the largest one, student loans. I took out loans during the height of the lending frenzy that was happening. I was taking out loans for cash I didn’t need, to buy things I really didn’t need. And again, this was a place I had no role modeling to show me how to manage money first of all, and second to show me how to responsibly take out loans to pay for my education. I was racking up credit card debt at the same time I was taking out student loans. Looking back, it’s crazy to think of the financial mess I was creating in my life!

But once I was on the trajectory to change my life for the better, debt also became an area of focus for me. Paying off my debt has shown me, first and most importantly, how to budget, but secondly also how to live inside of a budget. When I was living on borrowed money I had no restraint. I bought and did whatever I felt like, when the mood struck.

Now that I’m learning how to put my financial house in order, I’m understanding the importance of planning for the future, in planning for retirement, planning for down time, like vacations or hobbies, and how caring for my financial situation is in a way, caring for my needs.

I’ve also learned how NOT to take out debt. So when the time comes around for me to pursue a master’s in social work, I’ll be aware of how I budget and manage my money, and make a plan that won’t end up with me being tens of thousands of dollars in debt. My time is now more valuable to me than picking up a second job to pay back the money I was borrowing unsustainably in my youth. I know I won’t be going blindly down that road again.

These are the areas of my life that helped to give me the direction I needed to learn how to move forward with and in my life. Each element had its own piece of wisdom to impart. With baking, it was how to recognize when I’m growing in something, or what it looks like to be good at something while still learning from others along the way. With running and yoga, I was learning how to stay dedicated to a practice, but also enjoy that practice in the process. Enjoy the work. With writing, I was learning how to organize my time and thoughts, and also how to convey them in a way that makes sense to myself and others. And also my love for the natural world and my growing concern for the environment. Also to help process and put a structure to my story. In my relationships in that I want to grow along with and nurture these places and people in my life. But also in recognizing that you can make the switch from feeling hurt and alone to loved and supported. And with paying back my student loans in showing me how to budget for the future in a practical sense of the term.

It was when all these areas came together, that I was able to see how the different aspects of my personality made sense to me in the bigger picture. And it wasn’t easy, but what I found out was, that I care about the neglected areas. I like seeing things be brought back to life after struggle, abuse and neglect. We all go through it to some extent. Some of us more so than others, but we all come to our own understanding of what it means to have different aspects of our life feel neglected, without focus. Sometimes what we really need to do is take a step back and look at the different aspects in your life, to find out what makes you tick, and give yourself some much needed direction. That’s where my work lay. In heling others find that path.

I see it often too. So many of those close into me have been neglected to the point of not even knowing where to begin. And this is a difficult place to be. I feel that everybody deserves the right to feel a passion, to do and be connected to work that is greater than them. It doesn’t have to be larger than life. Just enough to feel like you’re making a difference. That’s what this blog is about, and hopefully soon, what the focus of my career will be.

So I’m here to tell you, if you’ve found yourself in a place where you are lacking in direction, don’t give up hope! Take a look at the things you’ve been doing, listening to, or watching. What have you been interested in lately. If you’re lucky, you may realize that you’ve been leaving yourself clues all along in the direction of your passions. Peace : ) and thanks for reading.

Image Credits: “Commute” by JanneM is licensed under CC BY-NC-SA 2.0