Your 50-Year-Old Client Has No Retirement Account. What's an Advisor to Do?

Sonia Martinez-Trujillo, an advisor with Fiduciary Financial Advisors in Houston, said this phenomenon is particularly acute within the communities she serves, including many Spanish speakers who work in construction, the restaurant industry or housekeeping; own a small business; or are families with a stay-at-home parent.

"Many have spent their lives in industries without access to employer-sponsored plans or have been self-employed and didn't know where to start," she said.

Martinez-Trujillo said her parents were in this position, and they struggled to find a Spanish-speaking fiduciary willing to work with families starting from scratch. She said that experience led her to transition from engineering into financial planning.

"When working with these clients, the priority is creating clarity and a path forward," she said.

Vincent DeCrow, wealth advisor at RISE Investments in Chicago, noted that several clients now retired in their 70s were small-business owners who never had retirement accounts during their working lives. They planned to rely on the proceeds from the sale of their businesses to fund their retirements.

"While it's unfortunate for these clients that they weren't able to save in a tax-advantaged manner, which would have resulted in a larger retirement nest egg, they coincidentally each have a net worth ranging from $2 million to $3 million," he said.

Retirement income planning, healthcare planning and achieving optimal asset allocations are the most imperative advice topics for these clients, said DeCrow. For income, he said he advises using a tax-efficient income strategy that includes municipal bonds, real estate income, qualified dividends and strategic harvesting of long-term capital gains.

"If you're in your 50s and don't have any retirement accounts, taking advantage of larger 'catch-up' contributions to traditional or Roth IRAs can be an effective way to start catching up," he said.

Kris Etter, founder of Beacon Financial Planners in Houston, said he sees this often with clients who prioritize their children's education over their own retirement. Etter said he hosts a "$1 Million Lunch" during which he educates client couples in their 50s on how they can accumulate $1 million and decrease their tax liability over the next decade. (He also has a similar meeting for clients in their 30s, called the "$4.5 Million Cup of Coffee.")

"The short version assumes both are employed with access to a 401(k) or 403(b)," he said. "We have them max out their contributions along with the catch-up to their employer plans and make maximum IRA contributions."

Martinez-Trujillo said she usually starts by analyzing cash flow to determine how much clients can realistically save in their remaining working years. From there, she builds a needs-based retirement budget focused on essential expenses. She then evaluates key factors, including the timeline to pay off a mortgage or exploring alternative living options, existing savings and how to invest them and Social Security strategies to maximize lifetime benefits.

"These clients may feel way behind, but I find that there are often more options than they expect," she said. "The goal isn't to make up for the lost time overnight but to build a realistic plan that allows them to retire with independence and dignity."