My dad, 75, only has $31K in savings. How can I help him make the most of his $65K salary and prepare for retirement?

When it comes to retirement savings, recommendations, expectations, and realities can be way out of sync.

Let’s imagine the case of Bianca, who is in her 40s, and her dad Enzo, who is 75 and still working full-time at the same family restaurant where he started as a dishwasher more than 30 years ago. He recently worked his way up to making $65,000 per year, but never managed to put away much for retirement. He has just $31,000 in savings.

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Until recently, Bianca never worried about her hard-working, reliable dad, but when she began planning more seriously for her own retirement, she discovered his situation — and started to panic.

It’s no wonder her research sent her spiraling. According to a study from Northwestern Mutual, Americans believe you need a nest egg of $1.46 million to retire comfortably. Meanwhile, many personal finance experts suggest saving 10 times your annual salary.

That said, most people never reach anywhere near that. Federal Reserve data shows that as of 2022, the most recent year for which data is available, the median American aged 65 to 74 had $200,000 saved for retirement. Those who are 75 and over, like Enzo, have likely been dipping into their savings for a few years and typically have $130,000 invested (1).

Needless to say, $31,000 is far below average, and it’s natural to be worried about how he’ll get by. But the situation is far from hopeless. There are several moves Enzo can make to ensure a secure retirement. And if he’s able to work a little longer, he has a prime opportunity to boost his savings.

Take advantage of Social Security

Axios analyzed data from the Bureau of Labor Statistics and found that almost 19% of Americans ages 65 and over were still working as of 2024 (2). That alone can help compensate for a lack of savings.

If Bianca’s father is 75, it means he’s beyond the point where it makes sense to delay Social Security. There is no financial incentive to hold off on taking benefits after age 70.

If you’re past retirement age, you can continue to work and still receive Social Security. Above a certain limit, the government deducts $1 from benefits for every $3 you earn. The limit is currently $62,160, so it won’t be a major factor in this case (3).

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The Social Security Administration has a handy calculator that allows you to estimate payments based on your income over the years, your age, and your year of retirement. Assuming Enzo worked his way up from around $12,000 per year at the restaurant in the mid-90s to $65,000 today, his payments would be about $2,360 per month (4).

Since he hasn’t been claiming benefits despite being eligible, he could also be entitled to a retroactive six months of payments (5).

A $65,000 annual salary plus Social Security may allow him to cover his expenses and save the majority of his Social Security income until he retires, which should take some of the stress off his mind — and allow that $31,000 to grow significantly.

Optimize retirement investments

With that part of the budget out of the way, it’s time to think about how to invest the extra income. It may be worth seeking the advice of a certified financial planner or financial advisor for a plan that is tailored to this family’s unique situation.

But in general, it pays to save in a tax-advantaged account like an individual retirement account (IRA). While there are age limits for traditional IRAs, they don’t apply to Roth IRAs. This year, he can contribute up to $8,000 (6).

If Enzo is 75 years old with a traditional IRA, he may already be on the hook for required minimum distributions (RMDs). Roth IRAs do not force savers to take RMDs, though. If he has any savings in a traditional IRA, he may want to consider rolling it over into a Roth account (6).

Read more: Are you richer than you think? Here are 5 clear signs you’re punching way above the average American’s wealth

Given his age, it’s important not to invest savings in anything too risky. Experts usually recommend that people past retirement age keep a good portion of their portfolios in stable assets like bonds. Someone who’s still working at 75 may not need as much savings as someone who decides to retire at 65, but there’s also a shorter time horizon for market fluctuations to sort themselves out.

The next step is to estimate annual expenses and see how much savings it will take to cover them once he's no longer able to work. Traditionally, retirees assume a 4% withdrawal rate from their retirement nest egg each year. With $31,000 saved, that amounts to $1,240 per year, which isn’t a lot, but could serve as a little bit of a cushion on top of Social Security.

Let's say Enzo’s monthly retirement expenses come to a modest $2,800, requiring an annual income of $33,600, and he’s collecting $2,360 in Social Security. That leaves him with $28,320 per year. Add on the $1,240 withdrawal from savings, and there’s still a shortfall. It’s time to think about creative solutions.

Reconsider the living situation

One sometimes-overlooked source of wealth for older people is home equity. If Enzo has either a paid-off home or a home that has appreciated in value significantly since the last time it was financed, it may be time to explore options for tapping into that equity — with care.

A reverse mortgage is one option. For those who qualify, it’s a way to borrow against the value of your home without having to make a payment until you move out, sell the house, or pass away (in which case it becomes part of your estate).

This is a form of debt, and it comes with interest and fees. Whatever you borrow will be subtracted from what you earn when the home is eventually sold. However, the payments are tax-free and don’t affect your benefits (7).

Refinancing the home and taking on a new mortgage at a higher value, often called cash-out refinancing, can be an option for some people, but it also comes with risks that you should talk through with a financial professional (8).

Finally, most older adults reach a point in their aging journey when they start to have conversations with loved ones about selling the family home and downsizing. Taking care of a home may become too stressful and difficult for an older person, especially if they’re also working or dealing with health challenges. Some people may have more space than they need.

Profits earned from selling a home are exempt from capital gains taxes up to $250,000, so they could be put toward a more secure retirement nest egg that is closer in value to the national average (9).

If Enzo goes that route, he’ll still need somewhere to live. His family could look into an option that is growing in popularity in the United States: multi-generational living. Adults across all age groups are four times more likely to be living with relatives other than a spouse now than in 1971, according to Pew Research Center (10). This trend is largely driven by young adults moving back home, but there are also more parents moving in with children. These days, 14% of adults living in someone else’s household are a parent of the household head, up from 7% in 1995 (11).

For Bianca, the solution was obvious: Asking her dad — who worked hard his whole life and supported his children and grandchildren financially — to move in with her. Without rent, maintenance costs or a mortgage to worry about, he can save aggressively, thanks to the wages he is still earning and the Social Security he qualifies for. He can also hope to reap the benefits of multi-generational living, including more time with children and grandchildren, more connection to community, and improved physical and mental health (12).

And he’ll have much more retirement savings to cover both day-to-day expenses and some of the costs associated with aging, putting his daughter’s mind at ease.

*With files from Maurie Backman *

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Article Sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Federal Reserve (1); Axios (2); SSA (3); SSA (4); SSA (5); IRS (6); FTC (7); CBS News (8); IRS (9); Pew Research Center (10); Pew Research Center (11); Generations United (12)

This article originally appeared on Moneywise.com under the title: My dad, 75, only has $31K in savings. How can I help him make the most of his $65K salary and prepare for retirement?

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