I am two years away from retirement and I have no money saved. I am now also facing bankruptcy. How do I come back from all this?

July 24, 2013
I have a 401k currently with my job and as of 7/21/13 I have $266,000. I am 56. Should I get more aggressive or should I stay moderate?

Advisor answers

Brian Frederick

Brian Frederick


You present an interesting question based on the facts you present. In this day and age, it is rare for people to retire before age 65 due to health care costs but you are looking to retire at age 58. I hope the early retirement stems from your choice rather than an external necessity such as job loss or medical condition.

Additionally, I'm going to read into your question a little further and make the assumption that all of your retirement savings is in the 401k plan. While $266,000 is nothing to sneeze at, it is not...

You have saved. That's the money in your 401K. You were doing the right thing by contributing part of your paycheck to that 401K. However, as the other advisors have said, that is not enough on which to retire.

If you could do it all over again, I know you would have saved more. That's why I encourage young workers to max out on their 401K and start a Roth IRA.

Are you being pressured into mandatory early-retirement? If so, I would seriously consider finding another job. Many people are working well ...

Guy Baker

Guy Baker


Fortunately, your 401k is exempt from bankruptcy. So you are blessed in that regard.

Do a budget. See how much you need to retire. Assess you social security income. What is the shortfall between your SS and your budget. This is what your 401k is going to have to support.

Conservatively, you can take about 4% of your 401k annually. Is that going to be enough? If not, then evaluate your options. Can you work parttime? Can do you have any other sources of income (rent out a room in your house? if you have one.) Find a less expensive place...

1) Do not take assets from your 401k, corporate retirement plans are typically exempt from bankruptcy proceedings, and personal IRAs are protected to over $1million (//seekingalpha.com/article/502201-ira-bankruptcy-protections).

2) Unless you have a pension, then you do not have enough money to retire early at age 58, 4 years before social security starts. If you are able, you should consider working until at least 62.

3) If the reason for filing bankruptcy is a spending problem, then you'd be wise to correct that issue first befo...