Self Employed 48years old and nothing saved for retirement

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Zhawk22
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Self Employed 48years old and nothing saved for retirement

Post by Zhawk22 » Wed Jul 11, 2018 5:48 pm

I am a 48 year old self employed female. I am currently trying to pay down my debt in order to buy a house debt free. I have nothing saved for retirement and would like advice on where to start putting money so I have something by the time I retire. I have started a Roth IRA this year. What else should I be doing. Thank you.

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englishgirl
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Re: Self Employed 48years old and nothing saved for retirement

Post by englishgirl » Wed Jul 11, 2018 7:37 pm

In addition to a Roth IRA, you can be saving in an employment-based account. Instead of a company 401k, you have the option of opening an individual 401k, a SIMPLE IRA or a SEP-IRA. Which one is best for you depends on a number of factors, including how much money you are making and how you are organized and pay yourself. Most here will tell you that an individual 401k is best, and yes, if you are bringing in a large amount of income it would be, but personally as someone who doesn't earn big money, enjoys simplicity, and pays myself distributions from an LLC rather than a salary, I decided that a SEP-IRA was a good choice for me. Try to read up on all the different accounts and if you have an accountant, maybe check in with them for a recommendation too.
Sarah

mhalley
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Re: Self Employed 48years old and nothing saved for retirement

Post by mhalley » Wed Jul 11, 2018 8:07 pm

With only 20 years to go till retirement I don't think I would look at buying a house debt free unless the debts are huge with very large interest rates. I would save a 20% down payment and take out a 15-20 year mortgage. Depending on the interest rate of the debt, I would not put off saving for retirement.

smitcat
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Re: Self Employed 48years old and nothing saved for retirement

Post by smitcat » Thu Jul 12, 2018 8:00 am

Zhawk22 wrote:
Wed Jul 11, 2018 5:48 pm
I am a 48 year old self employed female. I am currently trying to pay down my debt in order to buy a house debt free. I have nothing saved for retirement and would like advice on where to start putting money so I have something by the time I retire. I have started a Roth IRA this year. What else should I be doing. Thank you.
How does your SS account look like with your current status? Do you have a handle on your current expenses and what they might look like in retirement? What % is your current debt and how quickly ight you pay it back? A house may or may not be a best move dependent upon a host of things including: how long you would stay, fixed costs of home, full cost of home, rent vs home costs.
Please concentrate on the best moves for saving for retirement and if a home fits into that plan fine.

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StormShadow
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Re: Self Employed 48years old and nothing saved for retirement

Post by StormShadow » Thu Jul 12, 2018 8:25 am

I'd give up on the house, rent and use the savings for your house purchase to jump start your retirement.

Spend less, save more.

Roth IRA and solo 401k with self-matching.

knicknut
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Re: Self Employed 48years old and nothing saved for retirement

Post by knicknut » Thu Jul 12, 2018 8:45 am

StormShadow wrote:
Thu Jul 12, 2018 8:25 am
I'd give up on the house, rent and use the savings for your house purchase to jump start your retirement.

Spend less, save more.

Roth IRA and solo 401k with self-matching.
The math depends on where you live and your housing needs, but I would default to this option as well. Filling up those retirement accounts will probably leave you better off than putting it all into real estate and all the additional expenses and taxes it entails. I wouldn't bank on real estate values being substantially higher (esp net of interim costs) when you're 65.

staythecourse
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Re: Self Employed 48years old and nothing saved for retirement

Post by staythecourse » Thu Jul 12, 2018 8:51 am

Not enough information. Please find the sticky and give a more detailed description.

The biggest stands out is WHERE has all the money gone that you have made up to this point in your life. You have no retirement savings or house purchased so what have you been spending on instead? The reason I ask is IF you have a consume debt issue that has to be dealt with as not to happen again.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

Zhawk22
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Re: Self Employed 48years old and nothing saved for retirement

Post by Zhawk22 » Thu Jul 12, 2018 11:26 am

I was a single mother and working paycheck to to paycheck. I went back to school at age 40 to pursue a trade. My money went towards living basically and as mentioned in my original post I am paying down my debt now trying to get in a better place. Remember as you post your replies that everyone has a circumstance. Your tone is a little off-putting with tones of preaching.

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Re: Self Employed 48years old and nothing saved for retirement

Post by bloom2708 » Thu Jul 12, 2018 11:29 am

StormShadow wrote:
Thu Jul 12, 2018 8:25 am
I'd give up on the house, rent and use the savings for your house purchase to jump start your retirement.

Spend less, save more.

Roth IRA and solo 401k with self-matching.
+1

Buying a house (and all the related expenses) is not the answer to shore up your retirement. Home ownership is no nirvana. Rent a nice place and start saving/investing for retirement today.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

Maverick3320
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Re: Self Employed 48years old and nothing saved for retirement

Post by Maverick3320 » Thu Jul 12, 2018 11:38 am

Zhawk22 wrote:
Thu Jul 12, 2018 11:26 am
I was a single mother and working paycheck to to paycheck. I went back to school at age 40 to pursue a trade. My money went towards living basically and as mentioned in my original post I am paying down my debt now trying to get in a better place. Remember as you post your replies that everyone has a circumstance. Your tone is a little off-putting with tones of preaching.
Everyone has a circumstance, but the tone from the post came across as preachy because your circumstances aren't good, and we don't know why. If we don't know why, it's harder to help you.

Please remember that you're getting free financial advice here.

bikechuck
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Re: Self Employed 48years old and nothing saved for retirement

Post by bikechuck » Thu Jul 12, 2018 11:45 am

StormShadow wrote:
Thu Jul 12, 2018 8:25 am
I'd give up on the house, rent and use the savings for your house purchase to jump start your retirement.

Spend less, save more.

Roth IRA and solo 401k with self-matching.
What StormShadow said, I was about to type a very similar comment. Generally it is less expensive to rent than to own and generally investments in index funds will outperform money "invested" in a single family house. Below is a link to a well written piece about this isuue, there have been several similar articles like this one but this was the first one that I read and it resonated with me.

https://www.caniretireyet.com/renting-v ... ownership/

ReadyToRetire
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Re: Self Employed 48years old and nothing saved for retirement

Post by ReadyToRetire » Thu Jul 12, 2018 11:54 am

Frankly, if you did reinvent yourself to learn a trade/profession, you have already done in my opinion the best thing you could have possibly done - investing in yourself. I glean from your post that things financially are on the upswing now if you are looking at a house.

I know there are countless reasons why one would buy vs. rent and location does impact, but speaking from a position of a long time home owner, I like owning. True, it comes with maintenance and taxes, but it's still my preference. I would caution you to buy only as much house as you need. I made the mistake once of buying too much house and it took me some time to get out of it and into something smaller. But assuming you buy what you need and you like the area, etc., I think a case can be made for buying a home.

I agree with the other posters that I wouldn't go overboard trying to make an incredibly huge down payment. Although interest rates are rising a bit, they are still very low compared to historical standards. I'm only around 50 as well, but my first house I want to say I was paying nearly 10%. I would try to put a reasonable down payment in the range of 10% to 20% and then take advantage of the low rates. Given your age, I would try to opt for a 15 or maybe a 20 year note. Stay away from a 30 year mortgage. Being mortgage free when you hit retirement is a blessing you can give yourself that you will not regret.

And then start saving, saving, saving for future years. For this I would get some equity based and bond based ETFs or mutual funds from Vanguard or another low cost provider and start plowing money into them. The tax deferred programs (IRA's, SEPs, SIMPLE's, etc.) are great, but do keep some after tax savings going to. You never know what the future will bring and having both will give you some flexibility. If you are just starting on your savings journey, I wouldn't worry too much about specific allocations, equity vs, bond ratios, tax deferred vs after tax, etc. At this point just get in the habit of plowing money away.

And remember you are 48. That is still very young. You quite potentially have a good 20 or 25 solid earning years ahead of you. Enjoy yourself along the way. You are making good decisions now and are starting to overcome the obstacles thrown up in earlier years. Celebrate that. Spend some (within reason) money on yourself while you save for your future and try to enjoy the journey.

Best wishes!

bampf
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Re: Self Employed 48years old and nothing saved for retirement

Post by bampf » Thu Jul 12, 2018 12:03 pm

Zhawk22 wrote:
Thu Jul 12, 2018 11:26 am
I was a single mother and working paycheck to to paycheck. I went back to school at age 40 to pursue a trade. My money went towards living basically and as mentioned in my original post I am paying down my debt now trying to get in a better place. Remember as you post your replies that everyone has a circumstance. Your tone is a little off-putting with tones of preaching.
Welcome ZHawk22. This place can be tough to navigate, but, you are very welcome here. Never too late to learn about financial matters. With respect to what you should do, very difficult to give you a concrete roadmap without any significant details (debt, income, cost of living and so forth). That being said, there are a number of things you can do to get in front of things. First, nothing is absolutely critical such that you must do it right now. In fact the whole point here is to establish some solid foundations and give time an opportunity to be on your side. Thats not to say that you should put it off, but, rather that you should approach this with discipline and a methodology.

My recommendations would be as follows:

**Know.
1. Figure out what you are spending your money on. Know exactly where you spend your money, how much is going out and what are fixed costs vs costs that you can avoid. There are lots of tools to look at to help you with this. I use a spreadsheet.

**Save.
2. Once you know where your money is going, start to ask if you can minimize some expenses. Can you lower your mobile phones costs, your entertainment costs, your vehicle costs and servicing your debt? This will have a direct impact on the amount of money you have to save or invest.

**Invest.
3. Now that you know how much money you can invest/save, you can begin to make decisions on how to save and invest. IRAs, Roth, Taxable accounts. Emergency funds and so forth. This involves building an investment plan and setting goals. There are a lot of links here that can help you.

**Plan
4. This is probably this most important part of your journey towards retirement. If you take step 1 here (how much you spend) you can start to figure out how much you will need for when you do retire. There are lots of spending models and things to begin to plan for. Healthcare, entertainment, living expenses etc. This will help you in step 3 as well.

So, lot of words here and a probably it seems like a lot to do. It takes time to get good at this stuff, but the first step is reaching out. The second step is knowing that there is no perfect answer. There is only a range of answers for you and only you can decide.

One final comment. If you save 50% of everything you make every year, in 20 years you should be self sufficient based on your savings/investments. There is a ton of details to unpack in that statement, but, its a pretty fair starting point. Best of luck! Do some research and start getting rich slowly. We all want to help you.

--Bampf

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mhadden1
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Re: Self Employed 48years old and nothing saved for retirement

Post by mhadden1 » Thu Jul 12, 2018 1:13 pm

bampf wrote:
Thu Jul 12, 2018 12:03 pm
Zhawk22 wrote:
Thu Jul 12, 2018 11:26 am
I was a single mother and working paycheck to to paycheck. I went back to school at age 40 to pursue a trade. My money went towards living basically and as mentioned in my original post I am paying down my debt now trying to get in a better place. Remember as you post your replies that everyone has a circumstance. Your tone is a little off-putting with tones of preaching.
...

**Plan
4. This is probably this most important part of your journey towards retirement. If you take step 1 here (how much you spend) you can start to figure out how much you will need for when you do retire. There are lots of spending models and things to begin to plan for. Healthcare, entertainment, living expenses etc. This will help you in step 3 as well.

...
It will take some digging to put together a good plan. The plan might or might not include a house, depending on your needs and circumstances. If it does, and you work 15-20 years, you have time to pay off a mortgage before retirement.

Probably you, like me, expect to cover a lot of your retirement expenses with Social Security and Medicare. For SS you can use the ssa.gov website to find out about your likely retirement benefits.

Regarding your late start at retirement saving, you can only do what you can do. Luckily you have some time to work out a plan, and execute it, to get the best result you can. Good luck!
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

alex_686
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Re: Self Employed 48years old and nothing saved for retirement

Post by alex_686 » Thu Jul 12, 2018 1:34 pm

Zhawk22 wrote:
Wed Jul 11, 2018 5:48 pm
I am currently trying to pay down my debt in order to buy a house debt free.
Welcome to the forum.

I want to ask you a question to get a better idea of your goals and risk tolerance. Why do you want to buy a house debt free?

To expound on this, all 3 of these activities are investing.

1. Paying down debt - treat it as a negative bond. Know rate of return and low risk.
2. Investing in real-estate - and your home counts. Low rate of return and low risk.
3. Standard 3 fund tax advantaged investing. i.e., Putting money away in a IRA, Roth, SEP, etc.

I ask this question because most people would be better off putting 20% down on a house and investing in higher risk / higher return 3 fund portfolio. Of course this comes down to one's risk tolerance. Some of it is objective - I know of the vagaries of self-employed income. Some of it is subjective - some people just don't like taking risk.

However this seems like a extreme case. Can you shed some light on this choice. We might be able to suggest some tax-advantaged savings to meet this goal. There are aspects of IRA and Roth that can be exploited.

Zhawk22
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Re: Self Employed 48years old and nothing saved for retirement

Post by Zhawk22 » Thu Jul 12, 2018 3:02 pm

Hello. I was probably not very clear here. I am currently trying to pay down all of my debt so I can go into the home purchase free of debt and then try to get a 15 year mortgage. Perhaps renting is the way to go as I am starting so late saving for retirement. The idea is to be debt free with whichever direction I go so I can put a significant amount away for retirement. As I read all the informative replies, perhaps buying is not the best idea? Thank you.

Zhawk22
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Re: Self Employed 48years old and nothing saved for retirement

Post by Zhawk22 » Thu Jul 12, 2018 3:04 pm

I am also very new to investing. So am not clear as to what plan I should have in place once I have knocked out my debt. I am a sol proprietor of my business and work in a very seasonal and expensive town so my income is always very different.

staythecourse
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Re: Self Employed 48years old and nothing saved for retirement

Post by staythecourse » Thu Jul 12, 2018 3:14 pm

Zhawk22 wrote:
Thu Jul 12, 2018 11:26 am
I was a single mother and working paycheck to to paycheck. I went back to school at age 40 to pursue a trade. My money went towards living basically and as mentioned in my original post I am paying down my debt now trying to get in a better place. Remember as you post your replies that everyone has a circumstance. Your tone is a little off-putting with tones of preaching.
Okay now that we have some perspective the advice I think still makes sense of forget about saving for a house. Use that money earmarked for that and pour it into retirement investing. The most important thing is to set a plan on how much to save each month and do it. The only reason I, personally, was asking about where your money has gone is if it has gone to consumer debt it will NOT be as easy as saying, "Okay no more spending and start saving". If it was that easy no one would be in debt. If that is the issue you have to find ways to get the money into retirement investing BEFORE you get a chance to spend. Maybe cut up your credit cards and only use debit cards. Then set up autodeduction to Vanguard or wherever each month from your bank account to make sure you pay yourself first before you get a chance to spend it.

I know it may seem like we are jumping on you, but the ONLY way to improve one's situation is being candid to one's self HOW you got here in the first place. I say the same thing to myself when I make mistakes in life. Once you realize what the mistakes are then you can start coming up with a plan on how to prevent them again from happening.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: Self Employed 48years old and nothing saved for retirement

Post by pkcrafter » Thu Jul 12, 2018 3:20 pm

Zhawk, it's good that you are now realizing it is a very high priority to build assets to be used in retirement. You probably should be saving/investing at least 15% of your income because you will need about 25x your spending rate saved to make the "safe" withdrawal rate of 4%. The longer you can let the assets grow because of compounding, the higher the ending balance.

If you are self-employed you can opt for one of these plans:

https://investor.vanguard.com/what-we-o ... s/overview

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

SimplicityNow
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Re: Self Employed 48years old and nothing saved for retirement

Post by SimplicityNow » Thu Jul 12, 2018 3:29 pm

Please realize that people are trying to help and not judge you. That is why more information was solicited.
if you follow the format in the sticky at the top of this forum in "asking investment questions" we will have more information in order to help you.

ExitStageLeft
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Re: Self Employed 48years old and nothing saved for retirement

Post by ExitStageLeft » Thu Jul 12, 2018 3:30 pm

Welcome to the forum! A good place to start is the wiki page: Start Here.

If you would like specific advice tailored to your circumstance, it would be best to update your original post (use the pencil icon) to add information using the format shown in this thread. It asks for a lot of information that may not apply, but it also covers things that will help folks better understand your needs and goals.

Without specific information, folks are left blundering around trying to gauge your best options through the filters of their experience.

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ruralavalon
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Re: Self Employed 48years old and nothing saved for retirement

Post by ruralavalon » Thu Jul 12, 2018 3:42 pm

Welcome to the forum :) .

Congratulations on going back to school at age 40 to improve yourself. That takes some guts.

Age 48 is a late start on retirement investing, but not too late to make a difference if you plan well now. In general:
1) use tax-advantaged accounts whenever possible;
2) keep investing expenses and taxes low;
3) be broadly diversified; and
4) contribute as much as practical to retirement investing.
Wiki article, Bogleheads® investment philosophy""

Some additional information is necessary in order to make any very concrete suggestions to you. Please see this for format and information needed. : "Asking Portfolio Questions". In addition:
1) about how much do you feel that you might be able to contribute to investing annually?;
2) are there any employees in your business besides yourself? ; and
3) what fund firm is your new Roth IRA with?

You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.


Zhawk22 wrote:
Wed Jul 11, 2018 5:48 pm
I am a 48 year old self employed female. I am currently trying to pay down my debt in order to buy a house debt free. I have nothing saved for retirement and would like advice on where to start putting money so I have something by the time I retire. I have started a Roth IRA this year. What else should I be doing. Thank you.
Zhawk22 wrote:
Thu Jul 12, 2018 11:26 am
I was a single mother and working paycheck to to paycheck. I went back to school at age 40 to pursue a trade. My money went towards living basically and as mentioned in my original post I am paying down my debt now trying to get in a better place. Remember as you post your replies that everyone has a circumstance. Your tone is a little off-putting with tones of preaching.
Since you are self-employed you could consider using a SEP IRA, SIMPLE IRA, or individual (solo) 401k. Vanguard, small-business plans,"Compare plans". Fidelity also offers the same types of plans. Fidelity "Retirement plans for small businesses ". The Bogleheads' wiki has articles on each type of plan. Boglehead's wiki, "SEP IRA". Boglehead's wiki, "SIMPLE IRA". Boglehead's wiki, "Solo 401k Plan".
Last edited by ruralavalon on Thu Jul 12, 2018 3:48 pm, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

alex_686
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Re: Self Employed 48years old and nothing saved for retirement

Post by alex_686 » Thu Jul 12, 2018 3:45 pm

Zhawk22 wrote:
Thu Jul 12, 2018 3:02 pm
Hello. I was probably not very clear here. I am currently trying to pay down all of my debt so I can go into the home purchase free of debt and then try to get a 15 year mortgage.
So as others have suggested you should take a step back and figure out your goals. ExitStageLeft has some good links on where to start.

OK - now some generalizations.

I am modestly for home ownership, but it all depends on context. What portion of SS will cover your expenses, what are your goals, what is your risk tolerance, etc. How expensive are homes relative to renting? That being said, we often urge people to have at least 10% down payment if not 20% and a emergency fund.

Which leads us to debt. Yes, pay down the "bad" debt first, anything high interest. "Good" debt, like auto and education loans is a more complex question.

Lastly, I will point out that you can stash funds in a IRA or a Roth IRA and still use those funds for a down payment. So the savings would be tax advantaged and have the flexibility to be direct towards either goal. You need to read and review the rules so let us know if you want to go down that path.

stocknoob4111
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Re: Self Employed 48years old and nothing saved for retirement

Post by stocknoob4111 » Thu Jul 12, 2018 3:58 pm

you are still young enough, potentially 20 years of saving which is good. There are some people who are 65 and have nothing, so in that sense it's good that you are changing things...better late than never!

Dandy
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Re: Self Employed 48years old and nothing saved for retirement

Post by Dandy » Fri Jul 13, 2018 7:08 am

I might consider not buying a house. Lots of expenses in owning a house many of which are not obvious especially if you have been a renter. Also, the ability to deduct taxes and mortgage interest may not be as doable. If you don't keep your house and landscaping up the house value will not keep up.

Houses are often touted as being a great investment. While there a major exceptions from what I've read they usually basically match inflation over time.

If you are going to buy it might be better to buy a condo so you don't have to worry about landscaping, snow plowing, re roofing as a personal effort - it should be covered by the monthly fee. I'll let condo owners/renters comment on whether buying/renting a condo is better than a house or renting.

Also, with nothing saved for retirement it may be a bad time to be taking on a house and a mortgage.

alex_686
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Re: Self Employed 48years old and nothing saved for retirement

Post by alex_686 » Fri Jul 13, 2018 12:05 pm

Dandy wrote:
Fri Jul 13, 2018 7:08 am
I might consider not buying a house. Lots of expenses in owning a house many of which are not obvious especially if you have been a renter. Also, the ability to deduct taxes and mortgage interest may not be as doable. If you don't keep your house and landscaping up the house value will not keep up.

Houses are often touted as being a great investment. While there a major exceptions from what I've read they usually basically match inflation over time.

If you are going to buy it might be better to buy a condo so you don't have to worry about landscaping, snow plowing, re roofing as a personal effort - it should be covered by the monthly fee. I'll let condo owners/renters comment on whether buying/renting a condo is better than a house or renting.

Also, with nothing saved for retirement it may be a bad time to be taking on a house and a mortgage.
I will modestly take the other side.

First, the long term return of houses over the past 100 years has been at about the same level as bonds. They have different risk factors - inflation being the big one - but the level is in the same ball park. A note here is that most of a house's after inflation return is via rent, and if you live in that house you forgo the rent.

Second, the expenses of rental property, condos, and homes are about the same. Each will need a new roof every 20 years or so. The difference is that the cost of a new roof is buried in the rental payments, paid each month over 20 years via the monthly home owners association, or is paid in a lump sum by the home owner.

At this point I will ask to the OP "Are you handy?". I am assuming that if you work in the trades that you are. Or you could be lucky and have a brother-in-law who is. If so, maintenance expenses can be drastically cut via sweet equity. I might even advocate looking at buying a small duplex and renting out half. However I am not handy and lived in a condo when I was single.

Dandy
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Re: Self Employed 48years old and nothing saved for retirement

Post by Dandy » Fri Jul 13, 2018 1:13 pm

alex_686 wrote:
Fri Jul 13, 2018 12:05 pm
Dandy wrote:
Fri Jul 13, 2018 7:08 am
I might consider not buying a house. Lots of expenses in owning a house many of which are not obvious especially if you have been a renter. Also, the ability to deduct taxes and mortgage interest may not be as doable. If you don't keep your house and landscaping up the house value will not keep up.

Houses are often touted as being a great investment. While there a major exceptions from what I've read they usually basically match inflation over time.

If you are going to buy it might be better to buy a condo so you don't have to worry about landscaping, snow plowing, re roofing as a personal effort - it should be covered by the monthly fee. I'll let condo owners/renters comment on whether buying/renting a condo is better than a house or renting.

Also, with nothing saved for retirement it may be a bad time to be taking on a house and a mortgage.
I will modestly take the other side.

First, the long term return of houses over the past 100 years has been at about the same level as bonds. They have different risk factors - inflation being the big one - but the level is in the same ball park. A note here is that most of a house's after inflation return is via rent, and if you live in that house you forgo the rent.

Bonds are usually very liquid - houses are usually somewhat liquid but on occasion not very. Why would a person 48 with no retirement savings buy a house that is not overly liquid and assume mortgage debt to get a return similar to bonds?

Second, the expenses of rental property, condos, and homes are about the same. Each will need a new roof every 20 years or so. The difference is that the cost of a new roof is buried in the rental payments, paid each month over 20 years via the monthly home owners association, or is paid in a lump sum by the home owner.

Rentals have similar expenses divided over a large base - the cost to individual renter is usually less than an individual home owner.The OP needs some growth to get a bit of a retirement nest egg - sinking a large amount in a house seems a step backward.

At this point I will ask to the OP "Are you handy?". I am assuming that if you work in the trades that you are. Or you could be lucky and have a brother-in-law who is. If so, maintenance expenses can be drastically cut via sweet equity. I might even advocate looking at buying a small duplex and renting out half. However I am not handy and lived in a condo when I was single.
True - if you are very handy you could end up spending a lot of time but saving a lot of money. If you own your own business that might not be a good trade off.

BlueRidgePro
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Re: Self Employed 48years old and nothing saved for retirement

Post by BlueRidgePro » Fri Jul 13, 2018 2:01 pm

Buy the house. Mortgage payments build up your equity in the house. Monthly rent is money thrown away.

Work on paying off other debt, especially high interest credit cards.

Enjoy life, while you're still young. Retiring with lots of money is over rated. Money can't buy enjoyment when one is too old to take advantage of it.

Best to die broke or in debt after a life of enjoyment. Piling up money for your heirs to fight over serves no purpose.

metrunt
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Re: Self Employed 48years old and nothing saved for retirement

Post by metrunt » Fri Jul 13, 2018 2:12 pm

BlueRidgePro wrote:
Fri Jul 13, 2018 2:01 pm
Buy the house. Mortgage payments build up your equity in the house. Monthly rent is money thrown away.
I'll assume this is serious, as it's addressed to a newbie.

I'm surprised people still advocate this. The decision between rent/buy is not black and white.

I agree it's probably better to continue to rent for the foreseeable future.

Buying has a lot of transaction costs and you don't have a lot of money to spare.

Independent George
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Re: Self Employed 48years old and nothing saved for retirement

Post by Independent George » Fri Jul 13, 2018 2:35 pm

BlueRidgePro wrote:
Fri Jul 13, 2018 2:01 pm
Buy the house. Mortgage payments build up your equity in the house. Monthly rent is money thrown away.

Work on paying off other debt, especially high interest credit cards.

Enjoy life, while you're still young. Retiring with lots of money is over rated. Money can't buy enjoyment when one is too old to take advantage of it.

Best to die broke or in debt after a life of enjoyment. Piling up money for your heirs to fight over serves no purpose.
I disagree with everything here except paying off credit card debts.

Home equity is a good thing to have after you are satisfied that you are saving enough for retirement, and the decision to rent or buy depends entirely on the cost of each. Rent is not throwing money away if the purchase price (including taxes, insurance, association fees, and maintenance) is far greater than the cost to rent - especially with the new rules on itemized deductions. Money in retirement pays for things like medical care, or property taxes & repair bills on the house you just advocated buying. Furthermore, home equity is not liquid - it is very difficult to tap into that asset without paying a lot of transaction costs. If you have money in a retirement account and cost of living increases, you can sell a fraction of your assets to move someplace cheaper. If you have home equity but no cash, and property taxes increases, you have to sell a portion of your property (take out another mortgage) to pay for it.

Again, it all depends on the local real estate market and the true costs of renting vs buying, but the blanket statement that rent is just throwing money away, or that home equity should be your primary means of saving, are egregious.

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Re: Self Employed 48years old and nothing saved for retirement

Post by ruralavalon » Fri Jul 13, 2018 4:56 pm

Zhawk22 wrote:
Thu Jul 12, 2018 3:02 pm
Hello. I was probably not very clear here. I am currently trying to pay down all of my debt so I can go into the home purchase free of debt and then try to get a 15 year mortgage. Perhaps renting is the way to go as I am starting so late saving for retirement. The idea is to be debt free with whichever direction I go so I can put a significant amount away for retirement. As I read all the informative replies, perhaps buying is not the best idea? Thank you.
There is no black and white, easy, universal answer to the own versus rent question. The answer depends a lot on your personal circumstances (which we know only a little about) and your local real estate market (which we know nothing about).

Please see the wiki article, "Owning vs renting. "There are transaction costs associated with buying and selling a home. In particular there are mortgage closing costs when you buy, and a broker fee of about 6% when you sell. Therefore, a house normally must be owned several years before it appreciates enough to offset the transaction costs and make it cheaper than renting. " "The underlying housing equity is a real asset, but it is an incredibly poorly returning one. According to economist Robert Shiller, 'the average annual real (net of inflation) increase in home prices was a mere 0.40%'. "

That wiki article includes a calculator you could use to help decide.

I always had a very erratic income, so understand that part of your circumstances.

I suspect that at age 48, just starting to save for retirement, and with a highly variable income that renting may be better for you. But use the calculator to run the numbers which apply to your circumstances and locality.

. . . . .

Paying off high interest debt, like credit card debt, is a top priority. You are right to put that first.

The second priority should be starting a tax-advantaged account which you can use in addition to your IRA.. Since you are self-employed you could consider using a SEP IRA, SIMPLE IRA, or individual (solo) 401k. Vanguard, small-business plans,"Compare plans". Fidelity also offers the same types of plans. Fidelity "Retirement plans for small businesses ". The Bogleheads' wiki has articles on each type of plan. Boglehead's wiki, "SEP IRA". Boglehead's wiki, "SIMPLE IRA". Boglehead's wiki, "Solo 401k Plan".

Do you have any employees at your business besides yourself? What do you believe your average annual income might be? What do you believe your tax bracket might be? About how much (in dollars) do you believe that you may be able to contribute annually to retirement investing (total, all accounts)?

What fund firm is your Roth IRA with?
Last edited by ruralavalon on Fri Jul 13, 2018 5:18 pm, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

BlueRidgePro
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Re: Self Employed 48years old and nothing saved for retirement

Post by BlueRidgePro » Fri Jul 13, 2018 5:11 pm

I've owned my homes for years. The first one cost under $40K. Always had mortgage payments less than or equal to what rent would have been. When it was time to retire, I had paid off the mortgage and was ready for a smaller home. Sold my existing home for $1.5M and bought a smaller retirement home for under $500K. This left me with approximately $1M in cash. Had I rented, I'd have ZERO to show for it.

True that homes do not always increase in value (mine did), however the principal portion of monthly mortgage payments stays with you in the form of increased equity in the home. 100% of rent goes away.

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Re: Self Employed 48years old and nothing saved for retirement

Post by Dottie57 » Fri Jul 13, 2018 5:34 pm

knicknut wrote:
Thu Jul 12, 2018 8:45 am
StormShadow wrote:
Thu Jul 12, 2018 8:25 am
I'd give up on the house, rent and use the savings for your house purchase to jump start your retirement.

Spend less, save more.

Roth IRA and solo 401k with self-matching.
The math depends on where you live and your housing needs, but I would default to this option as well. Filling up those retirement accounts will probably leave you better off than putting it all into real estate and all the additional expenses and taxes it entails. I wouldn't bank on real estate values being substantially higher (esp net of interim costs) when you're 65.
+1

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Re: Self Employed 48years old and nothing saved for retirement

Post by Dottie57 » Fri Jul 13, 2018 5:54 pm

Zhawk22 wrote:
Thu Jul 12, 2018 3:04 pm
I am also very new to investing. So am not clear as to what plan I should have in place once I have knocked out my debt. I am a sol proprietor of my business and work in a very seasonal and expensive town so my income is always very different.
I am concerned about the seasonal aspect of your income. Investing each and every month / payday is essential to building up your retirement resources. During the FA months of your business do you work for some other entity? If not now, can you do so for the future??

I have retirement resources because I every payday money was taken from my paycheck and put into a 401k account. It was set to 50% of my income. So if Immade more, more went into retirement.

For you, I would think an Account at Vanguard would work. I would open some kind of 401k and just put money into a Target date fund for 2040. The target date funds all contain low cost Vanguard index funds.

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Re: Self Employed 48years old and nothing saved for retirement

Post by ruralavalon » Fri Jul 13, 2018 8:47 pm

Dottie57 wrote:
Fri Jul 13, 2018 5:54 pm
Zhawk22 wrote:
Thu Jul 12, 2018 3:04 pm
I am also very new to investing. So am not clear as to what plan I should have in place once I have knocked out my debt. I am a sol proprietor of my business and work in a very seasonal and expensive town so my income is always very different.
I am concerned about the seasonal aspect of your income. Investing each and every month / payday is essential to building up your retirement resources. During the FA months of your business do you work for some other entity? If not now, can you do so for the future??

I have retirement resources because I every payday money was taken from my paycheck and put into a 401k account. It was set to 50% of my income. So if Immade more, more went into retirement.

For you, I would think an Account at Vanguard would work. I would open some kind of 401k and just put money into a Target date fund for 2040. The target date funds all contain low cost Vanguard index funds.
I also had highly variable income.

With highly variable income I still invested every pay period, the amount varied wildly of course. The principle is still the same, I invested whenever I had extra money to invest. Whatever amount over what we needed for living expenses that month went into an account earmarked for retirement investing.

For the self-employed the possible account types include a SEP IRA, SIMPLE IRA, and individual (solo) 401k.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Dottie57
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Re: Self Employed 48years old and nothing saved for retirement

Post by Dottie57 » Fri Jul 13, 2018 9:05 pm

ruralavalon wrote:
Fri Jul 13, 2018 8:47 pm
Dottie57 wrote:
Fri Jul 13, 2018 5:54 pm
Zhawk22 wrote:
Thu Jul 12, 2018 3:04 pm
I am also very new to investing. So am not clear as to what plan I should have in place once I have knocked out my debt. I am a sol proprietor of my business and work in a very seasonal and expensive town so my income is always very different.
I am concerned about the seasonal aspect of your income. Investing each and every month / payday is essential to building up your retirement resources. During the FA months of your business do you work for some other entity? If not now, can you do so for the future??

I have retirement resources because I every payday money was taken from my paycheck and put into a 401k account. It was set to 50% of my income. So if Immade more, more went into retirement.

For you, I would think an Account at Vanguard would work. I would open some kind of 401k and just put money into a Target date fund for 2040. The target date funds all contain low cost Vanguard index funds.
I also had highly variable income.

With highly variable income I still invested every pay period, the amount varied wildly of course. The principle is still the same, I invested whenever I had extra money to invest. Whatever amount over what we needed for living expenses that month went into an account earmarked for retirement investing.

For the self-employed the possible account types include a SEP IRA, SIMPLE IRA, and individual (solo) 401k.
The only thing I slightly disagree with is “whenever I had extra money to invest”. I think many people wouldn’t have the extra. Therefor a percent needs to be invested every month. I am not trying to be unkind, but to have no retirement at all just surprises me. Given situation, I can understand very low, but nothing....

I wish the op the very best during the next 20 years and hope she starts investing immediately.

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ruralavalon
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Re: Self Employed 48years old and nothing saved for retirement

Post by ruralavalon » Fri Jul 13, 2018 9:14 pm

Zhawk22 wrote:
Wed Jul 11, 2018 5:48 pm
I am a 48 year old self employed female. I am currently trying to pay down my debt in order to buy a house debt free. I have nothing saved for retirement and would like advice on where to start putting money so I have something by the time I retire. I have started a Roth IRA this year. What else should I be doing. Thank you.
Zhawk22 wrote:
Thu Jul 12, 2018 3:04 pm
I am also very new to investing. So am not clear as to what plan I should have in place once I have knocked out my debt. I am a sol proprietor of my business and work in a very seasonal and expensive town so my income is always very different.
Zhawk22

If you will answer these questions we can give you some more definite ideas on what type of account to use, what funds to invest in, and what to do next after knocking out your debt.

Do you have any employees at your business besides yourself? About how much do you believe your average annual income might be? What do you believe your tax bracket might be? About how much (in dollars) do you believe that you may be able to contribute annually to retirement investing (total, all accounts)? (If you can't be precise, reasonable estimates will do.)

What fund firm is your Roth IRA with? How much is in that account? What investments are you currently using in that account? Please give fund names, tickers and expense ratios.

Please see this for format: "Asking Portfolio Questions".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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ruralavalon
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Re: Self Employed 48years old and nothing saved for retirement

Post by ruralavalon » Fri Jul 13, 2018 9:21 pm

Dottie57 wrote:
Fri Jul 13, 2018 9:05 pm
ruralavalon wrote:
Fri Jul 13, 2018 8:47 pm
Dottie57 wrote:
Fri Jul 13, 2018 5:54 pm
Zhawk22 wrote:
Thu Jul 12, 2018 3:04 pm
I am also very new to investing. So am not clear as to what plan I should have in place once I have knocked out my debt. I am a sol proprietor of my business and work in a very seasonal and expensive town so my income is always very different.
I am concerned about the seasonal aspect of your income. Investing each and every month / payday is essential to building up your retirement resources. During the FA months of your business do you work for some other entity? If not now, can you do so for the future??

I have retirement resources because I every payday money was taken from my paycheck and put into a 401k account. It was set to 50% of my income. So if Immade more, more went into retirement.

For you, I would think an Account at Vanguard would work. I would open some kind of 401k and just put money into a Target date fund for 2040. The target date funds all contain low cost Vanguard index funds.
I also had highly variable income.

With highly variable income I still invested every pay period, the amount varied wildly of course. The principle is still the same, I invested whenever I had extra money to invest. Whatever amount over what we needed for living expenses that month went into an account earmarked for retirement investing.

For the self-employed the possible account types include a SEP IRA, SIMPLE IRA, and individual (solo) 401k.
The only thing I slightly disagree with is “whenever I had extra money to invest”. I think many people wouldn’t have the extra. Therefor a percent needs to be invested every month. I am not trying to be unkind, but to have no retirement at all just surprises me. Given situation, I can understand very low, but nothing....

I wish the op the very best during the next 20 years and hope she starts investing immediately.
If self-employed sometimes there is nothing extra, its just impossible to defer a fixed dollar amount or fixed percentage. I invested whenever I had extra money to invest; I couldn't invest money when I didn't have it.

Everyone who works for your business is paid first, every vendor or utility who supplies your business is paid first, if you rent space for the business the landlord is paid first. The self-employed business owner gets what is left over after everyone else is paid. That's just part of being a self-employed business owner.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Dottie57
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Re: Self Employed 48years old and nothing saved for retirement

Post by Dottie57 » Fri Jul 13, 2018 9:48 pm

ruralavalon wrote:
Fri Jul 13, 2018 9:21 pm
Dottie57 wrote:
Fri Jul 13, 2018 9:05 pm
ruralavalon wrote:
Fri Jul 13, 2018 8:47 pm
Dottie57 wrote:
Fri Jul 13, 2018 5:54 pm
Zhawk22 wrote:
Thu Jul 12, 2018 3:04 pm
I am also very new to investing. So am not clear as to what plan I should have in place once I have knocked out my debt. I am a sol proprietor of my business and work in a very seasonal and expensive town so my income is always very different.
I am concerned about the seasonal aspect of your income. Investing each and every month / payday is essential to building up your retirement resources. During the FA months of your business do you work for some other entity? If not now, can you do so for the future??

I have retirement resources because I every payday money was taken from my paycheck and put into a 401k account. It was set to 50% of my income. So if Immade more, more went into retirement.

For you, I would think an Account at Vanguard would work. I would open some kind of 401k and just put money into a Target date fund for 2040. The target date funds all contain low cost Vanguard index funds.
I also had highly variable income.

With highly variable income I still invested every pay period, the amount varied wildly of course. The principle is still the same, I invested whenever I had extra money to invest. Whatever amount over what we needed for living expenses that month went into an account earmarked for retirement investing.

For the self-employed the possible account types include a SEP IRA, SIMPLE IRA, and individual (solo) 401k.
The only thing I slightly disagree with is “whenever I had extra money to invest”. I think many people wouldn’t have the extra. Therefor a percent needs to be invested every month. I am not trying to be unkind, but to have no retirement at all just surprises me. Given situation, I can understand very low, but nothing....

I wish the op the very best during the next 20 years and hope she starts investing immediately.
If self-employed sometimes there is nothing extra, its just impossible to defer a fixed dollar amount or fixed percentage. I invested whenever I had extra money to invest; I couldn't invest money when I didn't have it.

Everyone who works for your business is paid first, every vendor or utility who supplies your business is paid first, if you rent space for the business the landlord is paid first, the self-employed business owner gets what is left over after everyone else is paid. That's just part of being a self-employed business owner.
I do understand about a business. My dad was a veterinarian and office and vet tech people had to be paid. He was a junior partner for much of time. He did start a keough retirement plan when he became the major partner. But I do remember the talk at dinner table and needing to save for the lean winter monThs.

If op is staying with the business, I wonder if she will be able to save for retirement.

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ruralavalon
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Re: Self Employed 48years old and nothing saved for retirement

Post by ruralavalon » Fri Jul 13, 2018 9:58 pm

Dottie57 wrote:
Fri Jul 13, 2018 9:48 pm
ruralavalon wrote:
Fri Jul 13, 2018 9:21 pm
Dottie57 wrote:
Fri Jul 13, 2018 9:05 pm
ruralavalon wrote:
Fri Jul 13, 2018 8:47 pm
Dottie57 wrote:
Fri Jul 13, 2018 5:54 pm


I am concerned about the seasonal aspect of your income. Investing each and every month / payday is essential to building up your retirement resources. During the FA months of your business do you work for some other entity? If not now, can you do so for the future??

I have retirement resources because I every payday money was taken from my paycheck and put into a 401k account. It was set to 50% of my income. So if Immade more, more went into retirement.

For you, I would think an Account at Vanguard would work. I would open some kind of 401k and just put money into a Target date fund for 2040. The target date funds all contain low cost Vanguard index funds.
I also had highly variable income.

With highly variable income I still invested every pay period, the amount varied wildly of course. The principle is still the same, I invested whenever I had extra money to invest. Whatever amount over what we needed for living expenses that month went into an account earmarked for retirement investing.

For the self-employed the possible account types include a SEP IRA, SIMPLE IRA, and individual (solo) 401k.
The only thing I slightly disagree with is “whenever I had extra money to invest”. I think many people wouldn’t have the extra. Therefor a percent needs to be invested every month. I am not trying to be unkind, but to have no retirement at all just surprises me. Given situation, I can understand very low, but nothing....

I wish the op the very best during the next 20 years and hope she starts investing immediately.
If self-employed sometimes there is nothing extra, its just impossible to defer a fixed dollar amount or fixed percentage. I invested whenever I had extra money to invest; I couldn't invest money when I didn't have it.

Everyone who works for your business is paid first, every vendor or utility who supplies your business is paid first, if you rent space for the business the landlord is paid first, the self-employed business owner gets what is left over after everyone else is paid. That's just part of being a self-employed business owner.
I do understand about a business. My dad was a veterinarian and office and vet tech people had to be paid. He was a junior partner for much of time. He did start a keough retirement plan when he became the major partner. But I do remember the talk at dinner table and needing to save for the lean winter monThs.

If op is staying with the business, I wonder if she will be able to save for retirement.
She went back to school at age 40 to improve her prospects, is paying off her debt, and has started a Roth IRA, so that sounds hopeful to me.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

smitcat
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Re: Self Employed 48years old and nothing saved for retirement

Post by smitcat » Sat Jul 14, 2018 6:43 am

Dottie57 wrote:
Fri Jul 13, 2018 9:48 pm
ruralavalon wrote:
Fri Jul 13, 2018 9:21 pm
Dottie57 wrote:
Fri Jul 13, 2018 9:05 pm
ruralavalon wrote:
Fri Jul 13, 2018 8:47 pm
Dottie57 wrote:
Fri Jul 13, 2018 5:54 pm


I am concerned about the seasonal aspect of your income. Investing each and every month / payday is essential to building up your retirement resources. During the FA months of your business do you work for some other entity? If not now, can you do so for the future??

I have retirement resources because I every payday money was taken from my paycheck and put into a 401k account. It was set to 50% of my income. So if Immade more, more went into retirement.

For you, I would think an Account at Vanguard would work. I would open some kind of 401k and just put money into a Target date fund for 2040. The target date funds all contain low cost Vanguard index funds.
I also had highly variable income.

With highly variable income I still invested every pay period, the amount varied wildly of course. The principle is still the same, I invested whenever I had extra money to invest. Whatever amount over what we needed for living expenses that month went into an account earmarked for retirement investing.

For the self-employed the possible account types include a SEP IRA, SIMPLE IRA, and individual (solo) 401k.
The only thing I slightly disagree with is “whenever I had extra money to invest”. I think many people wouldn’t have the extra. Therefor a percent needs to be invested every month. I am not trying to be unkind, but to have no retirement at all just surprises me. Given situation, I can understand very low, but nothing....

I wish the op the very best during the next 20 years and hope she starts investing immediately.
If self-employed sometimes there is nothing extra, its just impossible to defer a fixed dollar amount or fixed percentage. I invested whenever I had extra money to invest; I couldn't invest money when I didn't have it.

Everyone who works for your business is paid first, every vendor or utility who supplies your business is paid first, if you rent space for the business the landlord is paid first, the self-employed business owner gets what is left over after everyone else is paid. That's just part of being a self-employed business owner.
I do understand about a business. My dad was a veterinarian and office and vet tech people had to be paid. He was a junior partner for much of time. He did start a keough retirement plan when he became the major partner. But I do remember the talk at dinner table and needing to save for the lean winter monThs.

If op is staying with the business, I wonder if she will be able to save for retirement.
Variable income here - cannot save in a 'regular' way- own our own business's.
IMHO - there is no reason that you have to save in a regular way (weekly or monthly) if you have a overall savings plan.
You follow your savings plan during the high and low times, no problem.

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Re: Self Employed 48years old and nothing saved for retirement

Post by Maverick3320 » Mon Jul 23, 2018 11:29 am

BlueRidgePro wrote:
Fri Jul 13, 2018 5:11 pm
I've owned my homes for years. The first one cost under $40K. Always had mortgage payments less than or equal to what rent would have been. When it was time to retire, I had paid off the mortgage and was ready for a smaller home. Sold my existing home for $1.5M and bought a smaller retirement home for under $500K. This left me with approximately $1M in cash. Had I rented, I'd have ZERO to show for it.

True that homes do not always increase in value (mine did), however the principal portion of monthly mortgage payments stays with you in the form of increased equity in the home. 100% of rent goes away.
The point everyone is making is that you can't use one data point as a case for an "always do this" answer. If you had rented an equivalent place, you might have paid less for the home, and you could have invested the difference. Or you could have had the misfortune of buying a house in a location where real estate didn't rise as much, or even dropped.

100% of rent does not "go away". It's paying for the roof over your head.

https://twocents.lifehacker.com/why-the ... 1773179027

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