We regret our lack of retirement Savings, although back then we hardly had any money to save.

We have always had unexpected expenses over the years on top of the regular bills.

We have only been able to save money in the last 2-3 years. We have all paid off our school loans, no longer owe credit cards, one car has been paid for in full (we still owe a second car). We saved around $ 80,000 in cash.

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

A few months ago I was discharged because of COVID-19 while pregnant. With the high cost of childcare, the pandemic, and baby # 2 on the way, we decided to stay home for the next few years rather than working full time. My husband’s income can cover the bills, but now we “don’t have much left to save”.

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

Thanks very much!

Late entry into retirement

See: I’m 55, tired of soul-destroying jobs, invested a million dollars badly – can I retire now?

Dear late retirement,

The good news first, it’s not too late to start. While the ideal time to start saving for retirement is in your 20s, the compound interest benefits alone give you plenty of time before you retire – there is hope!

Now the less-than-ideal news: you are right to worry about your lack of retirement savings. Prioritizing retirement savings is essential, but it’s difficult when you are raising a family, working on a salary, and paying for everyday expenses. So many people struggle with this. You’re not alone.

To know if you are really on the right track or not, you would need to do a more thorough analysis, including projected needs in retirement and sources of income you will have in retirement, such as: B. Personal savings, a pension and social security. Again, there are many variable factors. I know you retired when you were 60 or 65, but you may later decide that you want to continue working in some role at that age, or one of you may have to retire early due to unexpected circumstances. This is where working with a financial advisor can really help – they will consider all possible options, for better or worse, and work with you to achieve realistic goals.

To be honest, reaching your retirement age at 60 or 65 can be difficult – at least comfortably. Again, this depends, but at least it’s worth acknowledging as long as the extra cash flow is tight. Because of this, you can postpone your retirement for a few years so that you can save longer.

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

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

Having a number in the back of your mind – an ultimate monetary goal – helps for several reasons, including being accountable on your journey to retirement. “It is very difficult to motivate yourself to pursue an unclear long-term goal,” said Chris Chen, chief executive officer and financial advisor, Insight Financial Strategists. “Knowing that you need to have money to retire is not enough, you need to know how much money you need to save and invest to get the specific amount you need by the age of 65.”

Staying home mothers have tough jobs, and it makes sense to take on that role in the midst of a pandemic and with such high childcare costs. If this is the path you are taking, have a buffer of liquidity on hand as you are unsure of exactly when you will be returning to the workforce, said Jennifer Weber, vice president of financial planning at Weber Asset Management.

Do not miss: I’m a 32-year-old staying home mom and my husband makes $ 150,000 a year. Will I ever enjoy my retirement?

But then you invest some of your money. Weber recommends that you put part of your savings balance into an individual pension account. The maximum amount for anyone under the age of 50 is $ 6,000 per year. There are Roth IRAs that are dollar after-tax funded with tax-free distributions and traditional IRAs that are dollar-funded before tax but withdrawals are taxed. (The answer of which is the best depends on your situation and your tax brackets now and on the distribution – here is more on this one.)

To invest in an IRA, you must earn income, but there is a special rule for married people – if one spouse is employed, both of them can contribute to IRAs as long as the compensation and eligibility requirements are met and they file a joint tax return. They are known as “Spouse IRAs.” Under this rule, the two of you could deposit a total of $ 12,000 annually.

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

Finding the dollars to invest can be difficult, especially considering your situation, but it will really pay off in the future to find some money to put away. For example, if you could save $ 10,000 per year over the next 20 years and grow at a rate of 5%, you would have $ 350,000 in savings, said Jamie Ebersole, founder and CEO of Ebersole Financial.

“That, along with social security, should allow them to retire, especially if they fully own their own home,” he said. “It’s not going to be glamorous and you have to set expectations as such, but it’s achievable.” Of course, this is only possible if you are still able to pay for your house, utilities, food, childcare, health care, and other necessities.

See also: I’m a 31-year-old engineer looking to move to a lower paying job one day – what return do I need to keep my retirement plan going?

What you should still work on in the meantime, if retirement provision is your priority: Keep your expenses as low as possible without depriving yourself. First, make sure your expenses are below your income, Chen said. Then try to bring them below your income minus your savings needs.

Be strategic too, said Michelle Buonincontri, finance coach at New Direction Financial Strategies. Get together every now and then as a couple to go through the household budget and expenses and come up with a way to “stay ahead” of random, unexpected expenses, she said.

“I love using bucket for multiple savings goals as it creates clarity and accountability in the ‘decision’ to transfer expenses from these accounts rather than swiping a debit card and wondering what happened at the end of the month, “she said.

Automate your savings too, said Buonincontri. After you’ve checked your monthly finances – including checking your recent credit card and bank statements to see how money is going in and out – try to use some of your income towards your retirement goals before you actually hit your wallet let where you’re more likely to see and spend.

You have a solid foundation, said the advisors. You have no consumer debt, you’ve paid off your student loans, said Dennis Nolte, a financial advisor at Seacoast Investment Services. You have a car loan and a mortgage – but that also means you have home equity. You have a sizeable emergency fund and understand why you are on your retirement journey. The decision to stay home to look after the children is not just a financial decision, it is also a quality of life decision.

So I’ll close, and I hope you keep it in mind – “retirement” is a very broad term these days. It’s not what it was 20 years ago when you expected to give up at 65 and move to a beach. People are completely redefining this phase of life and the way to get there. You might decide later in life that you really never want to go back to work, or you and your husband might want to take on a money-making hobby or part-time job that will provide you with extra cash flow in “retirement”. “There are so many ways to make your career and family decisions,” said Pearson. There are just as many ways to manage ‘retirement’. ”

Do you have a question about your own old-age provision or about living in retirement? Email us at [email protected]