‘How do I wisely grow wealth?’: I have a fixed income and no Social Security. How can I ensure a comfortable retirement without traditional retirement benefits?

Hi Money Minder,

Hey there, I’m Lisa, a 41-year-old divorced mom living in a cheaper part of California. I snagged a home back in Jan 2023 with a 2/1 buy down, but my payments are about to jump from $1850 to $2150 real soon.

Here’s the deal – I got injured on the job as a government worker and now I’m sailing towards a medical retirement that’ll bring in around $5200 a month. Not bad, right? I’ve also got some sweet private disability insurance kicking in an extra $6400 a month after taxes, so I’m not too worried about the cash flow.

I’ve got about $50k in debts, but most of them are zero or super low interest. The biggest chunk is a solar loan of $36k at 3.49%. Nothing too crazy.

Now, here’s where I need your help. I won’t be able to go back to my old job, losing out on that sweet $6400 insurance money if I do. But, when I hit 67, that insurance money’s gone, assuming I’ll start drawing Social Security. Here’s the kicker – I ain’t eligible for SS ’cause of some government job loophole. Tricky, right?

I’ve got around $130k chillin’ in a HYSA, so how do I make sure I’m good to go come retirement time? That $5200 from my medical retirement is here to stay, but I wanna make sure I’ve got enough to live the dream when I hit 67. How can I smartly grow my wealth with what I’ve got?

Let me know your thoughts, Money Minder!

Cheers,
Lisa

Response from THE MONEY MINDER:

Hello There,

I understand the unique challenges you are facing, and I commend you for seeking advice on how to wisely grow your wealth considering your circumstances. Firstly, I want to express my sympathy for the challenges you have faced with your injury and retirement.

Given your financial situation, it seems that you have a solid foundation with your current income sources and savings. To strategically grow your wealth, I recommend the following practical steps:

1. Create a Comprehensive Financial Plan: Start by assessing your current financial situation, including income, expenses, debts, and savings. Develop a detailed budget and financial plan to help you make informed decisions about where to allocate your funds.
2. Focus on Debt Repayment: While most of your debts have low or zero interest, it’s still essential to prioritize paying off higher-interest debts like the solar loan at 3.49%. Being debt-free will provide you with more financial flexibility and allow you to allocate those funds towards wealth-building.
3. Invest for the Long Term: With a relatively stable income and savings, consider investing a portion of your funds in diversified investment vehicles like low-cost index funds, mutual funds, or retirement accounts like IRAs or 401(k)s. Consult with a financial advisor to create an investment strategy that aligns with your financial goals and risk tolerance.
4. Emergency Fund: Ensure you have an adequate emergency fund that covers at least 3-6 months of living expenses. This fund will protect you from unexpected financial setbacks and provide peace of mind.
5. Maximize Retirement Savings: Since you will not have Social Security benefits, it’s crucial to maximize your retirement savings accounts like IRAs or other tax-advantaged retirement plans. Consider contributing the maximum allowable amount each year to ensure a comfortable retirement.

By following these practical steps and consistently reviewing and adjusting your financial plan, you can enhance your wealth-building efforts and secure a stable financial future. Remember to stay informed, seek professional advice when needed, and make informed decisions based on your financial goals.

Wishing you success in your financial journey ahead.

Warm regards,
THE MONEY MINDER