Retirement Savings: It’s Never Too Late to Start, Even After Divorce
Finding yourself divorced and facing retirement with limited savings can be daunting, but financial experts say it’s not insurmountable. Even starting in your 50s, consistent saving and smart investing can lead to a comfortable retirement.
The Story of Trisha
Trisha, a 51-year-old Arkansas woman, found herself in this situation after her husband left her in 2022 following a 22-year marriage. He took his $130,000 annual income with him, leaving her with a new car and a $596 monthly payment . After a few years of adjusting, Trisha sought advice on how to secure her financial future, particularly her retirement.
Dave Ramsey’s Advice
Financial advisor Dave Ramsey reassured Trisha that reaching her retirement goals was achievable. He pointed out that many individuals in their 50s, earning between $50,000 and $75,000 annually, have become millionaires by age 65 or 70 with consistent effort .
The 7 Baby Steps
Ramsey recommended his 7 Baby Steps program as a roadmap to financial wellness:
- Saving a $1,000 starter emergency fund
- Paying off all debt (except the mortgage)
- Saving three to six months of living expenses in an emergency fund
- Investing 15% of your household income
- Saving for college for your kids
- Paying off your home early
- Building wealth and giving
Taking Action: Trisha’s Plan
Trisha had already taken positive steps, refinancing her car loan and starting a second job. She had $38,000 saved in a money market fund and $3,000 in another account . Ramsey advised her to prioritize paying off the remaining $25,000 car loan, leaving her with $16,000 for an emergency fund.
Boosting Your Savings
To maximize savings, Ramsey suggested exploring high-yield savings accounts. Options like a Wealthfront Cash Account currently offer a variable APY of 3.30%, with a potential boost to 4.05% for new clients during their first three months . These accounts offer competitive interest rates, easy access to funds, and FDIC insurance up to $8 million.
Investing for the Future
With an emergency fund established, Ramsey encouraged Trisha to invest 15% of her income. Earning $52,400 annually, plus $14,000 from a second job, and with an employer 401(k) match, Ramsey estimated she could accumulate $600,000 to $800,000 by age 70, even without future raises .
Key Takeaways
- It’s never too late to start saving for retirement. Consistent effort can yield significant results, even beginning in your 50s.
- Prioritize debt repayment. Eliminating high-interest debt frees up cash flow for saving and investing.
- Build an emergency fund. Having readily available funds provides a safety net and prevents derailing your financial progress.
- Invest consistently. Regular contributions, even small amounts, can grow substantially over time.
- Stay disciplined and track your progress. Monitoring your finances and adhering to a plan are crucial for success.
Americans’ Retirement Confidence
Trisha’s concerns are shared by many Americans. A Gallup poll found that while 59% of Americans have a retirement account, only about half believe their savings will be sufficient for a comfortable retirement . The median retirement account balance is $38,176, which may not generate substantial income in retirement.
Additional Resources
Consider exploring these options to further enhance your retirement planning:
- Acorns: Automate investing by rounding up everyday purchases.
- Arrived: Invest in shares of residential real estate with as little as $100.
Starting at 51 may seem challenging, but with focused saving, smart investing, and unwavering discipline, building a secure retirement is within reach.