No 401k Plan for Retirement, Now What?

No 401k Plan for Retirement, Now What?

Retirement Income Strategies for Those with Less Than a Hefty 401k, IRA, or Pension.

401k Savings are at an all time low, if any at all.
401k Savings are at an all time low, if any at all.

We hear or read about it all of the time, either the stats of how many Americans aren’t saving enough in their 401k’s for retirement or how important it is to build a retirement strategy that includes a 401k and a maybe a pension too. But really, are these people talking to or about everyone? Does everyone have all of their retirement plans in the bag but you? Conversely, we also hear about all of the hundreds of thousands that are unemployed or affected by the 7 year long recession, so it doesn’t all really make sense at times. Even a hefty emergency fund alongside extended unemployment isn’t built to last 5 years! Are these unemployed folks still funding some 401k or IRA somehow? Obviously not, so for the rest of us who aren’t in the “prime” zone financially, that aren’t set just yet and whose retirement plans will be a combination of jobs worked, savings and creative financial planning, there are some key things to focus on early.
What if you don’t have a healthy well vested 401k or other retirement plan, what will you do for retirement income? Do you have a pension from your current employer? How long can you do your current line of work, until you’re 60? 70? 75? Will you be physically able to work in your later years? Will your pension be enough if you have one? The ever daunting question that begins to come clearer and clearer as time goes on ad you do happen to survive all of those near misses in life leading into your thirties. Banks and brokers are offering cash incentives to do your rollover with their firm, so many of us don’t have a rollover. So many of us don’t have the $200,000.00 or more rollover to get the free $500.00
The conventional wisdom states to start saving in your 20’s and you can save up to one or two million dollars by the time you retire and do just fine meeting your living expenses from 4% – 10% of that savings a per year. That 4% – 10% is supposed to come from interest, etc. and it sounds like a great idea, if I had a brain in my 20’s… or um, my 30’s. So now what? There’s socking away as much as you can in the 401k now at the job you’ve working at for the past maybe 8, 10, 15 years… maybe. Speaking of maybes, there’s maybe a pension for some of us, if you’re lucky because that is disappearing with the clouds these days unless you work in the public sector -with no guarantees still. Well, if none of those fit you, again, then what?
There are Roth 401k and Roth IRA annual contribution limits of about $15,000 or $5,000 annually, give or take some details. About $10,000 limits or so in Education IRA’s if you plan to stash and dash there, but that’s not tax free contributions, only growth so it doesn’t matter anyway. And we can’t forget the high yield savings accounts that get a whopping 1%, so you’re only about 1% down every year behind inflation, At best it’s a money pit stop, but don’t get too comfy trying to reach “0%” interest by getting a high yield savings account in order to keep with inflation, easier said than done. Let’s not forget Social Security, if you’ve worked and paid into the system. The government sends letters every year with the estimates of how much you could expect if you were to retire today. Is it enough to cover your living expenses where you live and how you live today? Don’t fret, because there’s always something, some ways to make it happen for those who refuse to play dead. Ways to make to retirement moves that offer relative safety of principal invested and potential growth too. You just got get to doing it.

There are many strategies ranging from setting up annuities to inventing the iPhone and the all-time worst, the ”Lump Sum” plan. Here are three strategies that anyone can employ regardless of where they are on the retirement horizon as long as they willing to work at it.

  1. Leverage Peak “Earning Years”. The largest opportunity that exists is taking advantage of your “Earning Years” as they reach a plateau. These will be the years you can take risks, make very aggressive moves, change directions while you are at your highest level of marketability, skills are sharp and current, knowledge is current and relevant, you’ve earned your worth and know what it is. You’ve reached a point of having enough experience to command the high rate for what you offer to any employer. During these years you can lay real plans and execute them. If retirement savings isn’t caught up to where you are or want to be, then your peak “earnings years” give you one last great opportunity and they can easily last about 10 -25 years depending on your type of work.
  2. Create Small Business, the business of You. If you have skill, talent, knowledge set, or a specific ability that is marketable then cultivate it further. So start by becoming fully invested in you, become licensed, certified, more educated or get whatever credentials necessary to operate as a small business with the intent to hand over the “production” part of the business to someone else while you still own it. Consider that even doctors and dentists have private practices where other doctors and dentists are in their employ. This may or may not last into retirement depending on the line of work, however, it does offer the possibility of getting up some serious savings from income for investing or just keeping safe. For example if you are handy or a mechanic, becoming a contractor and then hiring capable employees to carry on doing the work while your run the business. Same goes for everything from hairdresser to real estate agent to painter or car mechanic. Yes there will be some upfront investment of both time and money, yes you will need to step up your business savvy, and yes there is some risk. Just keep in mind, you are also taking the bull by the horns, by providing these answers for yourself.
  3. Income Generating Real Estate. In any case Real Estate is an available avenue to consider, building an income property portfolio or adding it to your current retirement plan can give it a boost if done properly. Consider first building up the necessary monies and position to make quality real estate purchase in a moderately high demand market. Try to stay away from low rent and problem areas as much as possible, although they have profit too, they also require much more hands on management at times. Consider the ongoing costs of maintenance and management for everything from water leaks to tenant evictions. This isn’t something most people want to do in retirement, so be prepared to give up to 15% for this to get done, it’s deductible so keep it simple and let someone handle the potential headaches. Focus on a market close to your area of retirement. Most people have some time between now and retirement to get this done by building up savings, taking care of any credit issues, learning the ropes and locking in their income generating properties.
It'll come down to maintaining an income when you're retired.
It’ll come down to maintaining an income when you’re retired.

There are still the usual routes of saving and investing in everything from bonds, REITS, ETF’s and mutual funds and they are as good as the hundreds of other plans the finance gurus come up with. Still, for the rest of us, we may need to put together a plan that is workable to add on to the savings and investment plan that is something we can work on and cultivate. Unless you really have a ton of money invested in a mutual fund, ETF or somewhere else in the general market, then it’s just sitting… not doing much, just there, sometimes it’s up, sometimes it’s down. Some of us are hard line go getters in life and will need to take more of an active role, and feel encouraged as their plans come to fruition right in front of their eyes, that’s what this post is about. All the while, saving and investing the profits.