I just turned 60 last week, and I'm not sure how old you are, but it's one thing to 'say' you can work past 67 and another thing to 'do' it.
I'm in retail sales, which is not overly physically demanding, but it is hard on your feet and back, and the random shifts mean you can be working until 9 or 10 at night and back the next day at 10 am. While I do work with women in their 70s and 80s, I'm not sure that I will want to continue at full time for another 7 years.
My husband works from home and travels a few times a year for work. His job is physically easier but more time intensive because he can always continue working long past an external cue to quit. But he will probably continue until 67.
I am thankful I contributed to 401Ks at all my retail jobs and was fully vested in two of them. I am fortunate that I was able to let them alone. If I had had to make a real choice of a house down payment, I might have done what you did, but my fear is that many people close them for non essential reasons and would regret it if they had known (although someone once told me you can take out a loan against your 401K and not pay a penalty?)
Yes, you can take a loan from a 401(k) if your company's plan allows it! There's no tax penalty or income tax in that case; it's treated just like any other debt. You repay it with interest, but all the money goes back to your account, no fees or interest go to a bank like a typical loan.
I've felt some shame in this area. I wonder how much of the shame is because of budget culture and the pressure to be totally responsible for something that, in reality, is difficult, if not impossible, for many people? Collectively, we lack so much imagination around this. I hope too for better policies so that everyone is supported throughout life and as we age.
I don’t have a lot put aside because I never earned much. And it’s occurred to me many times that the money I struggled to save could have better served me as money to live on.
Curious as to where you put any savings you do have - all in a high yield savings account? What about investing in an ETF that specifically holds companies that you can get behind? Also have you found that even with the costs of maintaining a home, ownership still shakes out to be the better fiscal decision? Thank you!
I wrote in the book about curating an investment portfolio to align with your values — it doesn't square all the ethical concerns around investing. There's still the underlying ethical issue of ownership and profit. Workers don't receive proper value for their contribution; instead labor generates "profit" that shareholders benefit from. Plus, the standards for funds that claim to be "sustainable," etc. vary from firm to firm. The only way to really be sure a portfolio matches your personal values would be to choose investments yourself, and that's strongly advised against because of the greater financial risk of that kind of strategy.
I've only been in my house for two years so far, and the costs haven't been high so far. Over time, big things come up (I'm waiting for my furnace to go out any day!), so the lifetime costs are probably comparable to an expensive rental. But, crucially, you can finance a lot of the costs of maintaining a home in a way you can't do with rent — so the actual impact on my day-to-day finances is much better.
Depends on how old the home is and how much money you need for maintaining it. I’ve found that if you can save enough for a down payment and closing costs, ownership makes sense if renting a comparable home in a comparable neighborhood costs more. If it’s cheaper to rent, keep renting. Rent gives you a place to sleep at night and is therefore money well spent.
I have been self employed most of my working life, and did not have access to an employer-sponsored 401(k), let alone one with any kind of match. What I am doing to fund my retirement is something I rarely see talked about, and it's not something most planners would recommend. But it is working for me (so far).
When I was in my late forties, I opened a self-directed taxable brokerage account and began investing $50/month in individual dividend-paying stocks and then ETFs. I enjoy doing the research and deciding what to invest in. Next I opened a Roth account and put higher-yielding closed-end funds, business development companies, and real estate investment trusts in that account. Paying off grad student loans and credit card debt gave me more income to invest. I was also married, so my husband's income helped. I have been investing for 17 years now and the income generated across those accounts plus my husband's rollover IRA (from being laid off) and the Roth I opened for him is almost 50% of my last corporate salary.
There is nothing that says you can't use a taxable brokerage account to help fund your life both now and in the future. Dividends can be spent as needed, added to savings, or reinvested (sometimes at a discount!), and when you hold long term they are taxed at a low rate. Roth accounts can function as emergency savings--since you put in money you've already paid taxes on, you can take out those contributions without tax or penalty, anytime.
Right now, I am taking all dividends as cash, using some to supplement my income from PT work and leaving the rest to earn interest--my brokerage pays a little more than my HYSA. But since I don't have to sell shares, I don't worry as much about volatility in the markets or sequence of returns risk. I expect some of my holdings may cut their dividend if we have a prolonged recession, but that's why I read the earnings reports. Plus I'm still working PT, for at least another year. Fortunately I enjoy my work!
It's great to see how different strategies work for folks :) Did you have the financial education you have now when you started investing, or were you learning as you went? It sounds like you have a great grasp on these products!
Learning as I went, and still doing it. I read something every day and would describe myself as a buy and monitor investor. Wanting to improve my own financial situation eventually led me to formal training in financial coaching and counseling. Happy to share what I know if you ever want to chat.
I have the same reservations you do about investing in the stock market and am actually consideing--counterintuitivrly maybe--looking into a career as a financial planner because I want to better understand the otpions. I don't have answers, just so many questions. I would like to explore with like minds other ways to grow wealth and security as we age.
I love your approach! I did the same thing getting my financial educator certification; I wanted to explore alternative ways to learn about money, but it was really helpful to first get a solid foundation in the traditional ways.
Due to seeing a lot of close relatives being a financial "burden" for their kids when they reach old age, I don't have the courage to not invest in retirement. Curious how to factor that into the equation (the fear of one's kid being the one responsible for you finacially when you get older...) Any thoughts?
I wonder about this too, it's a situation my partner and I will be in soon enough bc their family members didn't ever save any money nor estate plan for their disabled relative. And as a disabled person myself, I always panic seeing myself and others not saving every possible penny because I have seen how quickly it goes when you don't have an income. And there's no safety net besides relatives if you're lucky
It’s really nice to read another perspective. All I ever see is people and articles talking about investing and while I think it’s a great concept, I do think it’s very hard to do with a minimal salary.
Yes! I don't have a good alternative for those of us who can't or don't want to put money into an investment account, but I think it's important to let folks know they're not alone.
It does help a lot. I understand people wanting to help teach others about investing. I think it’s wonderful. BUT I also represent clients who live on temporary assistance and minimum wage and can not even afford basic necessities so investing would be a luxury for them
I also pulled money out of retirement (it was a Roth IRA, so no penalties because it was only my contribution I pulled). I did it last year, when we were in a financial pickle and needed an infusion of cash to keep us going until our finances stabilized. I don't regret it, but I do hope to eventually "pay myself back."
You're right that there is no good answer to the question of retirement under our current system. It really sucks. I suppose you *could* save for retirement by putting your money in a high-yield savings account or CDs and simply accepting the lower rate of return on your money. Owning your own home is also a great strategy to reduce costs in your senior years.
Really curious about what state support there is in the US for retirees… In the U.K. we have a state pension with a triple lock and have to actively opt out of workplace pensions rather than opt in, so it *feels* as though a lot of the decision-making is taken away and it just sort of happens (this is a terrible explanation, I know!). There’s obviously more to it than this, for example you have to work for 10 years to qualify and for 35 years to get the full amount, but I do think it alleviates a little of the stress around retirement. I’m curious about how other countries do this… 🤔
Hannah's overview is great! It sounds like our basic systems are similar, though I'm curious about how much you receive in state pension. In the U.S., on average, Social Security replaces about 37% of your pay, which is about half of what people need in retirement. Some workplace retirement plans are opt-in and some are opt-out — I think it's trending more toward the latter in recent years, and some states might require it, but there's not a nationwide requirement for it.
A huge problem with retirement planning in the U.S is our health care system. People 65+ get public Medicare health insurance, which pays for a portion of health care costs. Retirees end up paying for a lot of health care out of pocket, especially long-term care — and Medicare collects on their estate after their death to repay some costs!
Here is the US, we have Social Security. It's a system that workers pay into at a specific percentage of ~12% of your earnings (for traditional workers, the worker pays half and their employer pays half; for self-employed people like me, we pay the full amount ourselves). Once a certain number of years worked has been met *and* you reach a certain age, you can then begin collecting your Social Security monthly payments.
The problems are that 1) these payments are never enough to actually cover the full cost of living, and 2) Republicans continue valiant efforts to cut the system.
Technically, the money workers put into the system is the same money being paid out at that time; so, in other words, younger generations are technically paying the retired generation. It's not a personal savings account that you individually pay into and then dip into your own savings when you're in retirement.
Also while I'm on the subject I will rail against the Social Security policy that upon a recipient's death, their estate must pay back the Social Security payment for that month. So, you could get your monthly payment, live that whole month, spending that money throughout the month on, you know, living, and then die on the last day of that month, and the estate owes back that month's full monthly payment. It's absolutely absurd.
That's a great question! The timing of this post is weird, because everyone in finance right now is saying do NOT pull money out of the stock market when it's down. And I generally agree with that, because it sucks to lose money into thin air (even if that money came out of thin air in the first place).
If someone is in this situation, I'd say talk to a financial planner about your specific plans. The market has recovered from the Liberation Day dip for now, but it's probably going to continue going up and down with Trump's actions, so no one can time it perfectly. You just have to figure out what makes the most sense for your circumstances and needs.
I am not sure about the details, but it seems that's why pensions where so appealing. I wonder how old people felt back then and they feel about retirement for younger generations.
Ahhh! Dana! Thank you for writing this (upon my personal request!)! I read it somehow slowly and quickly all at once, and I know I'm going to revisit it. I especially appreciate your willingness to be honest about how different parts of your brain say different things, and how, because of that tug-of-war, your choices have changed before and so may again. That's the honest nuance that's so often missing when personal finance is written from a prescriptive-advice perspective. I appreciate your work so, so much.
I think what you’re leaving out of this piece is that owning your home outright IS a sort of retirement plan. That’s not an option for folks living in many areas. I totally relate to hating the way we are pressured into investments that may not align with our ethics. I also love the idea of finding better investment solutions. But encouraging people to forgo a plan that could set them up for security down the road because “maybe something better will exist” is such misleading advice. No one should be throwing away their plan if they’re doing it in a way that doesn’t establish some other form of security.
I just turned 60 last week, and I'm not sure how old you are, but it's one thing to 'say' you can work past 67 and another thing to 'do' it.
I'm in retail sales, which is not overly physically demanding, but it is hard on your feet and back, and the random shifts mean you can be working until 9 or 10 at night and back the next day at 10 am. While I do work with women in their 70s and 80s, I'm not sure that I will want to continue at full time for another 7 years.
My husband works from home and travels a few times a year for work. His job is physically easier but more time intensive because he can always continue working long past an external cue to quit. But he will probably continue until 67.
I am thankful I contributed to 401Ks at all my retail jobs and was fully vested in two of them. I am fortunate that I was able to let them alone. If I had had to make a real choice of a house down payment, I might have done what you did, but my fear is that many people close them for non essential reasons and would regret it if they had known (although someone once told me you can take out a loan against your 401K and not pay a penalty?)
Yes, you can take a loan from a 401(k) if your company's plan allows it! There's no tax penalty or income tax in that case; it's treated just like any other debt. You repay it with interest, but all the money goes back to your account, no fees or interest go to a bank like a typical loan.
I've felt some shame in this area. I wonder how much of the shame is because of budget culture and the pressure to be totally responsible for something that, in reality, is difficult, if not impossible, for many people? Collectively, we lack so much imagination around this. I hope too for better policies so that everyone is supported throughout life and as we age.
I don’t have a lot put aside because I never earned much. And it’s occurred to me many times that the money I struggled to save could have better served me as money to live on.
That's exactly where I found myself!
Curious as to where you put any savings you do have - all in a high yield savings account? What about investing in an ETF that specifically holds companies that you can get behind? Also have you found that even with the costs of maintaining a home, ownership still shakes out to be the better fiscal decision? Thank you!
I wrote in the book about curating an investment portfolio to align with your values — it doesn't square all the ethical concerns around investing. There's still the underlying ethical issue of ownership and profit. Workers don't receive proper value for their contribution; instead labor generates "profit" that shareholders benefit from. Plus, the standards for funds that claim to be "sustainable," etc. vary from firm to firm. The only way to really be sure a portfolio matches your personal values would be to choose investments yourself, and that's strongly advised against because of the greater financial risk of that kind of strategy.
I've only been in my house for two years so far, and the costs haven't been high so far. Over time, big things come up (I'm waiting for my furnace to go out any day!), so the lifetime costs are probably comparable to an expensive rental. But, crucially, you can finance a lot of the costs of maintaining a home in a way you can't do with rent — so the actual impact on my day-to-day finances is much better.
Depends on how old the home is and how much money you need for maintaining it. I’ve found that if you can save enough for a down payment and closing costs, ownership makes sense if renting a comparable home in a comparable neighborhood costs more. If it’s cheaper to rent, keep renting. Rent gives you a place to sleep at night and is therefore money well spent.
I have been self employed most of my working life, and did not have access to an employer-sponsored 401(k), let alone one with any kind of match. What I am doing to fund my retirement is something I rarely see talked about, and it's not something most planners would recommend. But it is working for me (so far).
When I was in my late forties, I opened a self-directed taxable brokerage account and began investing $50/month in individual dividend-paying stocks and then ETFs. I enjoy doing the research and deciding what to invest in. Next I opened a Roth account and put higher-yielding closed-end funds, business development companies, and real estate investment trusts in that account. Paying off grad student loans and credit card debt gave me more income to invest. I was also married, so my husband's income helped. I have been investing for 17 years now and the income generated across those accounts plus my husband's rollover IRA (from being laid off) and the Roth I opened for him is almost 50% of my last corporate salary.
There is nothing that says you can't use a taxable brokerage account to help fund your life both now and in the future. Dividends can be spent as needed, added to savings, or reinvested (sometimes at a discount!), and when you hold long term they are taxed at a low rate. Roth accounts can function as emergency savings--since you put in money you've already paid taxes on, you can take out those contributions without tax or penalty, anytime.
Right now, I am taking all dividends as cash, using some to supplement my income from PT work and leaving the rest to earn interest--my brokerage pays a little more than my HYSA. But since I don't have to sell shares, I don't worry as much about volatility in the markets or sequence of returns risk. I expect some of my holdings may cut their dividend if we have a prolonged recession, but that's why I read the earnings reports. Plus I'm still working PT, for at least another year. Fortunately I enjoy my work!
It's great to see how different strategies work for folks :) Did you have the financial education you have now when you started investing, or were you learning as you went? It sounds like you have a great grasp on these products!
Learning as I went, and still doing it. I read something every day and would describe myself as a buy and monitor investor. Wanting to improve my own financial situation eventually led me to formal training in financial coaching and counseling. Happy to share what I know if you ever want to chat.
I have the same reservations you do about investing in the stock market and am actually consideing--counterintuitivrly maybe--looking into a career as a financial planner because I want to better understand the otpions. I don't have answers, just so many questions. I would like to explore with like minds other ways to grow wealth and security as we age.
I love your approach! I did the same thing getting my financial educator certification; I wanted to explore alternative ways to learn about money, but it was really helpful to first get a solid foundation in the traditional ways.
Thanks for the encouragement. I vacillate widely day by day and sometimes hour by hour.
Due to seeing a lot of close relatives being a financial "burden" for their kids when they reach old age, I don't have the courage to not invest in retirement. Curious how to factor that into the equation (the fear of one's kid being the one responsible for you finacially when you get older...) Any thoughts?
I wonder about this too, it's a situation my partner and I will be in soon enough bc their family members didn't ever save any money nor estate plan for their disabled relative. And as a disabled person myself, I always panic seeing myself and others not saving every possible penny because I have seen how quickly it goes when you don't have an income. And there's no safety net besides relatives if you're lucky
Disability is an important factor in this planning, thank you for sharing your experience!
I don't have kids, so I'd love to hear from folks who do!
It’s really nice to read another perspective. All I ever see is people and articles talking about investing and while I think it’s a great concept, I do think it’s very hard to do with a minimal salary.
Yes! I don't have a good alternative for those of us who can't or don't want to put money into an investment account, but I think it's important to let folks know they're not alone.
It does help a lot. I understand people wanting to help teach others about investing. I think it’s wonderful. BUT I also represent clients who live on temporary assistance and minimum wage and can not even afford basic necessities so investing would be a luxury for them
I also pulled money out of retirement (it was a Roth IRA, so no penalties because it was only my contribution I pulled). I did it last year, when we were in a financial pickle and needed an infusion of cash to keep us going until our finances stabilized. I don't regret it, but I do hope to eventually "pay myself back."
You're right that there is no good answer to the question of retirement under our current system. It really sucks. I suppose you *could* save for retirement by putting your money in a high-yield savings account or CDs and simply accepting the lower rate of return on your money. Owning your own home is also a great strategy to reduce costs in your senior years.
Great post, Dana <3
I'm really grateful to be a homeowner now, especially of a very low-cost property. It offers me an incredible peace of mind thinking about my future.
Really curious about what state support there is in the US for retirees… In the U.K. we have a state pension with a triple lock and have to actively opt out of workplace pensions rather than opt in, so it *feels* as though a lot of the decision-making is taken away and it just sort of happens (this is a terrible explanation, I know!). There’s obviously more to it than this, for example you have to work for 10 years to qualify and for 35 years to get the full amount, but I do think it alleviates a little of the stress around retirement. I’m curious about how other countries do this… 🤔
Hannah's overview is great! It sounds like our basic systems are similar, though I'm curious about how much you receive in state pension. In the U.S., on average, Social Security replaces about 37% of your pay, which is about half of what people need in retirement. Some workplace retirement plans are opt-in and some are opt-out — I think it's trending more toward the latter in recent years, and some states might require it, but there's not a nationwide requirement for it.
A huge problem with retirement planning in the U.S is our health care system. People 65+ get public Medicare health insurance, which pays for a portion of health care costs. Retirees end up paying for a lot of health care out of pocket, especially long-term care — and Medicare collects on their estate after their death to repay some costs!
Here is the US, we have Social Security. It's a system that workers pay into at a specific percentage of ~12% of your earnings (for traditional workers, the worker pays half and their employer pays half; for self-employed people like me, we pay the full amount ourselves). Once a certain number of years worked has been met *and* you reach a certain age, you can then begin collecting your Social Security monthly payments.
The problems are that 1) these payments are never enough to actually cover the full cost of living, and 2) Republicans continue valiant efforts to cut the system.
Technically, the money workers put into the system is the same money being paid out at that time; so, in other words, younger generations are technically paying the retired generation. It's not a personal savings account that you individually pay into and then dip into your own savings when you're in retirement.
Also while I'm on the subject I will rail against the Social Security policy that upon a recipient's death, their estate must pay back the Social Security payment for that month. So, you could get your monthly payment, live that whole month, spending that money throughout the month on, you know, living, and then die on the last day of that month, and the estate owes back that month's full monthly payment. It's absolutely absurd.
If you do have money invested in stocks (not me!) and want to pull it out, do you have advice on when to do that given current events?
That's a great question! The timing of this post is weird, because everyone in finance right now is saying do NOT pull money out of the stock market when it's down. And I generally agree with that, because it sucks to lose money into thin air (even if that money came out of thin air in the first place).
If someone is in this situation, I'd say talk to a financial planner about your specific plans. The market has recovered from the Liberation Day dip for now, but it's probably going to continue going up and down with Trump's actions, so no one can time it perfectly. You just have to figure out what makes the most sense for your circumstances and needs.
I am not sure about the details, but it seems that's why pensions where so appealing. I wonder how old people felt back then and they feel about retirement for younger generations.
I’m nostalgic for the defined-benefit plans my generation will never experience!
I don't know about the process, but I naively feel that people are going to have to lobby to bring back pensions / or a fix for retirement.
I wish I knew more! Because I feel that missing a big chunk of how people managed their finances back then.
Ahhh! Dana! Thank you for writing this (upon my personal request!)! I read it somehow slowly and quickly all at once, and I know I'm going to revisit it. I especially appreciate your willingness to be honest about how different parts of your brain say different things, and how, because of that tug-of-war, your choices have changed before and so may again. That's the honest nuance that's so often missing when personal finance is written from a prescriptive-advice perspective. I appreciate your work so, so much.
Thank you for the prompt!
This is fascinating!
Thank you :)
I think what you’re leaving out of this piece is that owning your home outright IS a sort of retirement plan. That’s not an option for folks living in many areas. I totally relate to hating the way we are pressured into investments that may not align with our ethics. I also love the idea of finding better investment solutions. But encouraging people to forgo a plan that could set them up for security down the road because “maybe something better will exist” is such misleading advice. No one should be throwing away their plan if they’re doing it in a way that doesn’t establish some other form of security.