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It’s hard to watch someone you love approach retirement with almost nothing saved, especially when that someone is your parent.
Let’s say your dad is 54, earns $70,000 a year working as a contractor and owns a home worth $400,000 outright. He’s debt-free, but he doesn’t have a 401(k) and has only $10,000 saved in a brokerage account. He’s starting to think about retirement, and you’re starting to panic. Is it too late for him to catch up? Can you help?
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It’s not a great spot to be in, but he’s far from alone. A CNBC survey (1) shows 40% of American workers are behind on their retirement savings. Meanwhile, Americans believe they will need about $1.26 million saved to retire comfortably in 2025, according to Northwestern Mutual’s 2025 Planning & Progress Study (2).
With your dad’s retirement savings sitting at $10,000, he’s far behind where many Americans believe he should be, especially at his age. Still, all is not lost.
With a steady income, no debt and a valuable home, your dad has some advantages. The key now is using the next 10 to 15 years wisely. Here’s how your family can help him turn things around.
Where does he stand?
There’s no getting around the fact that your dad has fallen behind on his savings. Some financial advisors recommend having around seven times your salary saved by age 55, which means your dad should have $490K in his retirement account.
But he should take solace: The Federal Reserve says the 2022 median retirement savings amount for Americans ages 55 to 64 was only $185,000 (3).
“There are so many individuals, young, mid-career and deep into their career, that are not saving enough for a healthy and secure retirement,” Jacqueline Reeves, the director of retirement plan services at Bryn Mawr Capital Management, told CNBC.
But your dad has some things going for him — he owns his own home outright. Second, he’s debt-free, something that only 23% of Americans can say, according to WalletHub (4).
Even so, it could pay to take a close look at your dad’s finances with an eye for budgeting. For instance, insurance is likely something your dad is overpaying for. According to a report from the Consumer Federation of America, (5) homeowners’ insurance premiums rose by 24% on average over the last three years. In fact, average homeowners’ insurance premiums per policy increased 8.7% faster than the inflation rate between 2018 and 2022, based on data from the U.S. Department of the Treasury (6).
Your dad might be able to save an average of $484 annually by shopping around and comparing rates from lenders nationwide and choosing the lowest possible offer.
Thanks to OfficialHomeInsurance.com, the process is now easier than ever. All he has to do is enter some basic information about himself and the property he’d like to insure, and OfficialHomeInsurance.com will comb through their database of over 200 insurers and show the best rates available in your area — in just two minutes.
The best part? This process is completely free and won’t impact his credit score.
Another angle to consider is car insurance. Depending on your dad’s driving record, he may be able to drop down his monthly costs even more by shopping around for a better deal.
That’s where a service like OfficialCarInsurance.com can come into play, which can help you find rates as low as $29 per month.
How it works is simple: Enter some basic information, like the make and model of his car, and OfficialCarInsurance.com will pull up rates from top providers such as Progressive, GEICO, State Farm and Allstate. It takes only a few minutes to find rates, and your dad could put any savings towards his retirement plans.
Lowering your dad’s insurance costs is a smart step — but it’s just one piece of the puzzle.
It might also be worth looking at the bigger picture to help him strengthen his financial footing before retirement rolls around.
To help your dad, consider when he plans to retire. If he’s in good health, he may have 10 to 15 years left of full-time work. If he can put off claiming his Social Security benefit until age 67 or later, he can maximize those monthly checks and continue to invest money for his retirement. Plus, if he waits to retire until later, he will be eligible for Medicare coverage, which kicks in at age 65.
But figuring out the timing for retirement can be tricky, especially if you’re playing from behind. After all, he has only 11 years to boost his $10K in savings if he wants to retire at 65.
Consulting a financial planner could help your dad figure out a retirement plan as well as come up with strategies to boost his nest egg.
You can find a vetted FINRA/SEC-registered advisor near you through Advisor.com.
Once you enter some information about your dad and his retirement goals, Advisor.com will search through its extensive database to find the right fit for him. Since Advisor.com’s roster consists of fiduciaries, they’re legally obligated to act in your best interests.
Hiring a financial planner can be a lifelong commitment, especially if they’re good at what they do. As such, Advisor.com lets you set up a free introductory call with no obligation to hire to assess whether you are on the same page.
Read more: Warren Buffett used 8 simple money rules to turn $9,800 into a stunning $150B — start using them today to get rich (and then stay rich)
Where do we start?
Your dad’s first move might include setting up an emergency fund with the $10,000 he’s already saved. Experts suggest keeping three to six months of living expenses in an emergency fund.
Rather than keeping his savings uninvested in a brokerage account, your dad might want to consider moving it to a high-yield account that supports unlimited transactions. This way, he can earn interest on uninvested funds while making sure they’re accessible at all times.
One option is to earn up to 4.50% APY on his balance with SoFi’s checking and savings account.
SoFi doesn’t charge any monthly fees or impose any minimum balance requirements or withdrawal limits. You can also get peace of mind with SoFi’s 24/7 fraud monitoring and up to $3 million in FDIC insurance coverage.
Even better, you can get a $300 bonus when you set up direct deposit.
But your dad does have something going for him: a paid-off home.
If you find yourself in a similar situation where a majority of your wealth is tied up in a relatively illiquid asset like a house, you could tap into your home equity by opting for a home equity line of credit (HELOC).
Having access to your home equity can help cover unexpected expenses, pay off substantial debt, fund a major purchase like a home renovation, or supplement income from your retirement nest egg.
Rates on HELOCs and home equity loans are typically lower than APRs on credit cards and personal loans, making it an appealing option for homeowners with substantial equity.
Unlock great low rates in minutes by shopping around. You can compare real loan rates offered by different lenders side-by-side through LendingTree.
Just answer a few simple questions, and LendingTree will match you with up to 5 lenders with low rates today. Terms and Conditions apply. NMLS# 1136
Opening a Roth IRA could be the next step in preparing for retirement. Since your dad is over the age of 50, he can contribute up to $8,000 a year.
Make sure that he starts saving ASAP. If he contributes $8,000 a year to a Roth from now until age 67, with an average 7% annual return, he could build a nest egg that tops $200,000. If he pairs that with maximized Social Security benefits and remains debt-free, he should be able to cover his needs.
It’s also important to remember that his investments don’t have to be limited to contributions to retirement accounts.
Every dollar saved could make his retirement more comfortable. In his 50s, your dad needs to capitalize on every opportunity to grow his nest egg.
To do so, your dad could turn spare change from everyday purchases into an investment opportunity with Acorns. Saving and investing even $3 per day could add up to over $1,000 in a year. And that’s before compound interest.
Here’s how it works: Once you link a debit or credit card, Acorns will automatically round up each transaction to the nearest dollar and set aside the difference. Once your balance reaches $5, it will automatically be invested in expert-built diversified ETFs. You can also set up recurring investments for as little as $5.
Plus, you can get a $20 bonus investment when you sign up with Acorns today with a monthly contribution.
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Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
CNBC (1), Northwestern Mutual (2); The Federal Reserve (3); WalletHub (4); Consumer Federation of America (5); U.S. Department of Treasury (6)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.