Struggling Financially in Mid-Career: Downgraded Job, Insufficient Savings for Retirement, and Only $200,000 in Assets - Desperate for Assistance
In a recent report by Vanguard, the average 401(k) balance for a 45-year-old stands at approximately $188,643. This figure underscores the importance of saving for retirement and the need for strategic planning.
Mary Clements Evans, a Certified Financial Planner (CFP) and Financial Advisor, emphasizes the significance of using one's current job as a platform for skill development and, if possible, skill acquisition. She also highlights the importance of being emotionally and financially prepared for normal stock market volatility when investing for growth.
To emotionally prepare, understanding how the markets work is crucial. Financially, never invest money that you need within a few years into growth. Instead, prioritise boosting your emergency fund if you don't have at least six months' worth of living expenses in cash.
Evans recommends owning shares of a few dozen companies across a range of market sectors. Diversification is key, and growth can be achieved through large, well-run companies with good track records. However, it's important to remember that diversification spreads risk, which can lead to more stable returns over the long term.
Investing for growth is particularly important if you're many years away from retirement age. If you're unable to contribute more towards retirement, it's essential to invest what you can. For example, if $200,000 is left to grow at a yearly 7% return, it would be roughly $774,000 in 20 years.
However, in today's economy, finding a better-paying job may take time, especially in industries threatened by AI. During the 2008-2009 recession, many people were unable to find a new job for years. While the current economy is different, it's essential to stay resilient and keep networking.
If you've taken a pay cut, try to squeeze out the employer-matched 401(k) to take advantage of free money for your nest egg. In the meantime, stay in touch with your professional contacts and continue to inquire about job openings. Use LinkedIn and other job sites to continue your search.
It's also worth noting that many large companies are cutting headcount in anticipation of tariff-related blowback. This could create opportunities for those seeking new employment.
In times of financial crisis, Evans advises against touching retirement savings. Instead, consider temporary spending reduction or a side hustle if a lower income doesn't cover expenses.
The unemployment rate, as reported by the Bureau of Labor Statistics on August 1, stands at 4.2%. While this is a promising figure, it's important to remember that many qualified people are out of work, with far too few good prospects. So, it's crucial to stay proactive in your job search and continue to develop your skills and network.
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