Dear Penny: Can I Possibly Hope to Retire if I’m 45 With Only $55K Saved?

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Dear Penny,

I have been working since the age of 14. I am now 45 with two (almost) adults, living at home still and attending college. I have been a single mom for the past 10 years and my kids’ sole provider. 

For a good portion of my life, I was low-income. It’s only been in about the last 10 years that I haven't felt like I was drowning financially. I am a penny pincher — I don't buy new and I love to save, so I feel like I have the right mindset. 

But being that I live in Southern California, it has been a bit challenging trying to save for retirement. I have managed to put away around $55,000 in I bonds, savings, a basic emergency fund and a 401(k). I am leery of investing because I don't feel like I have enough that I can just lose it without taking a huge hit. 

I currently only make around $45,000 per year, and I fear I will never be able to retire. I plan on moving out of California in the next five years (after my kids graduate from college), but at that point, I will be 50 and looking for new employment. It's scary and starting to weigh on me pretty heavily.

Is there hope for retirement? I feel like I need advice and a little hope.


Dear K.,

You’ve raised two kids in Southern California on a $45,000 salary. I’d say you’ve earned your blackbelt in frugality. You know you’re behind on retirement savings. But given your circumstances, having $55,000 saved is still a pretty big accomplishment.

Saving and (sorry to say it) investing are essential to retirement planning. But lifestyle is an oft-forgotten part of the equation. When you find joy in saving instead of spending, you can get away with less retirement savings than someone who’s in constant pursuit of shiny new objects.

Dear Penny

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Now let’s talk about the saving and investing component. Investing is pretty much the only way someone with an ordinary income can build a large enough nest egg to retire.

You don’t need to start picking your own stocks or make a risky bet on cryptocurrency to invest. In fact, you’re already investing since you have a 401(k). While investing always carries some risk, you don’t need to worry about a market downturn wiping out your life’s savings.

A target-date fund is a good option for investing retirement money. Essentially, these funds invest your money in a mix of assets that starts out riskier and then gets gradually more conservative over time.

“Riskier” just means that you’ll start out with a higher concentration of stocks vs. bonds. And because your money is invested across hundreds or even thousands of stocks, you’re automatically diversified, which means you’re protected if some companies fail. Then your money is gradually reinvested into less-risky assets as you get closer to retirement.

The overwhelming majority of 401(k) plans offer target-date funds. They’re also an option if you open an individual retirement account (IRA).

You may not have a lot of extra money to invest right now. Make it your goal to put any future pay raises you get into your 401(k). Since your kids are older, this may be a good time to take on a side gig. If you could earn an extra $125 or so most weeks of the year, you could start maxing out an IRA. If your kids have jobs, it’s reasonable to ask them to chip in for expenses so that you’ll free up money to invest.

You say you’re scared by the prospect of leaving California — which I assume will substantially lower your cost of living — and finding new work at 50. But you have five years to prepare. You don’t need to figure out where you’ll be five years from now today.

Try setting some shorter-term goals that will help you accomplish the long-term goals. You want to retire at some point, so a good starting goal might be to invest $100 a week. You can also start thinking about what types of jobs you might be interested in a few years from now when you move and what new skills you’ll need to get there.

If you need an extra dose of hope, look at what you’ve accomplished in the past 10 years. You’ve gone from feeling like you’re drowning financially to keeping your head well above water. With hard work and continued penny pinching, you can get to a point where retirement is in sight.

Once you finally get your finances in order, you want to keep them that way. Here are several moves to make now.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].