Dear Penny: I’m 55 With No Savings or Life Insurance. What Are My Options?

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Dear Penny,

I’m 55 years old, and I work full time when work is available with a government agency. 

I’ve worked since age 18, however, I don’t have any retirement savings. I don’t know what I should do at this age, or what investment fund or financial institution to trust with minimal risk. 

In addition, I do not have any major illnesses and I need affordable life insurance. I prefer not to purchase term insurance because I will probably outlive the terms. Do you have any ideas for me?

-T.

Dear T.,

At 55, you’re young enough that you can expect to live another 25 to 30 years — and quite possibly longer. Since it sounds like you’re in good health, you have a long retirement to prepare for and not much time to save for it.

But at 55, you’re old enough that your life is expensive to insure.

Statistically, you’re way more likely to die than a twentysomething. So by the time you’re in your 50s, you’ll pay anywhere from three to six times more for life insurance than someone in their 20s.

For whole life insurance — the most common alternative to term life insurance — the cost of premiums could seriously impede your ability to save. A healthy 55-year-old can expect annual premiums of $6,000 or more for a $250,000 policy.

The tricky thing about financial planning is that we really don’t know whether we’ll live to be 100 or get struck down by lightning tomorrow. In a perfect world, you’re prepared for both extremes and everything in between.

But in the real world, we have finite resources. I’m assuming you haven’t started saving for retirement because you have a limited amount of cash.

So while building a nest egg and buying a non-term life insurance policy are separate goals, I’d suggest they’re also mutually exclusive. As in, you may very well have to choose one or the other.

If you still have dependents, I’d suggest you reconsider term life insurance and purchase a policy that would cover their basic needs until they’re able to be independent. For example, if you have a 12-year-old child, you might purchase a 10-year policy to get them to adulthood should you die.

Beyond that, unless you have extenuating circumstances — say, a child with a disability who will need lifelong support and care — saving for your own future is your No. 1 priority.

Unfortunately, I don’t have any personal finance magic tricks for building a healthy retirement fund at 55. You’ll need to put every resource into saving money and plan to work for as long as you can.

Since you say you work full time when work is available, I assume you don’t have access to an employer-sponsored retirement plan, like a 401(k) or 403(b). This probably falls into the obvious file, but I’ll throw it out there anyway: If you can use your 37 years of work experience to find a steadier job with retirement benefits, by all means, do it.

Regardless, open an individual retirement account (IRA) pronto. It’s pretty simple to do using one of the many online financial companies that use robo-advisers, which means that a computer picks your investments for you. You’ll typically be asked to estimate how many years you have until retirement, along with a series of questions to gauge your risk tolerance.

From there, you’ll get recommendations for how to allocate your portfolio. While I can’t tell you how you should invest your money, what I can tell you is this: It can be intimidating to trust a computer’s recommendations, but historically, computers fare better at choosing investments than humans.

Because you’re over age 50, you can contribute up to $7,000 in your IRA for 2019; for people under 50, the limit is $6,000. Try to put every spare dollar you can in your IRA with the goal of maxing out your contribution every year.

Yes, that’s a lot of money to sock away, but there are lots of ways to make money beyond your full-time job. Consider possible ways to earn side income, like driving for a ride-hailing service, petsitting or renting out a spare room on Airbnb — anything to bring in extra cash.

If you can fully fund your IRA, try to make paying off any debt you have your next-highest priority. Retirement will be a lot less stressful without a mortgage or car payment.

Just know that the greatest gift you can give your loved ones is to prepare for your future so you’ll need fewer of their resources in retirement. So use what you do have to fund what I hope is a long and healthy life.

Robin Hartill is a senior editor at The Penny Hoarder and the voice behind Dear Penny. Send your questions about retirement to [email protected]der.com.