My friend has never been very good with money and hasn't built up any retirement savings throughout his life. Like most people eventually do at some point or another, he ran into hard times and had an accident a few years back that put he and his wife out of work (he was in construction). They lost their home in the process and have moved to a trailer that is at least paid off. They were living like they would never get old, in a house that was too big, with far too much debt. He's since started working again within the last year and called me tonight to ask for advice about retirement. The thought of being 60 with no retirement savings is a scary thought, to say the least, but this is where he's at and I'm trying to help now that he's finally asking for it.
His situation is that he's saved up about $2500 in a life insurance policy (I know, not a great vessel for retirement investing, I'm sure his agent sold him on it). He's putting $200/month into it, $75 of which goes to fees/insurance. So only $125 into investment. The invested portion apparently has a guaranteed interest rate of 6%. He's wondering:
A. What he should do with the money that he's managed to save in the insurance policy. (I know, I know, $2500 isn't even an emergency fund. But you have to think through the mind of someone who's never had $2500 in a savings account before).
B. Whether he should continue contributing $200/month to the policy and get the 6% growth or invest somewhere else (potentially an IRA). This rate is only guaranteed until 66, which is 6 years from now. Now, I have thoughts on this as well, but I've never put myself in the shoes of a 60 year old man with barely any money, so I'm definitely looking for insight. My first advice to him was, "Whatever you do, just don't spend the money, and don't withdraw it." I'm mostly concerned that he'll get some idea to "invest" it in a newer (used) car. Since he's going to be working for most of the remainder of his life, I think he could put that money towards an IRA and do okay. Realistically, he's still looking at needing 10 solid years of full-time work in one form or another. I'm also interested in how much cheaper (if at all) a cheap term life insurance plan would save him a month. His current plan is $100,000 and ends when he's 66.
At the end of whatever I tell him, regardless of what to do with the money, I realize that the biggest bit of advice will likely be "You'll just have to start contributing as much as you possibly can to retirement savings for the next ten years at least." And for those reading, work hard and try to not put yourself and your family through the stress of having no savings at 60 years old. :)
TL;DR: My 60 friend doesn't have retirement savings, finally decided to start saving, and wants to know what to do with the money.
Submitted February 17, 2017 at 06:35AM by i_just_have_no_idea http://ift.tt/2m1IQ4q
