This Pennsylvania 60-year-old has $0 in savings and $26K in consumer debt, but he wants to retire at 65 — here’s his plan

Moneywise
This Pennsylvania 60-year-old has $0 in savings and $26K in consumer debt, but he wants to retire at 65 — here’s his plan
This Pennsylvania 60-year-old has $0 in savings and $26K in consumer debt, but he wants to retire at 65 — here’s his plan

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Like many older Americans, Tom from Lancaster, Pennsylvania is approaching retirement with nothing saved.

After witnessing his father die six months before retirement and suffering a heart attack himself, he went on a spending spree: “I was like, ‘I’m going to live like it’s my last,’ because you just don’t know,” he told hosts of The Ramsey Show during a recent episode.

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“I think that’s where I fell into a trap.”

Nevertheless, as Tom, 60, told the co-hosts, he’s determined to dig his way out of this trap rapidly — and his game plan was a surprise even to them.

Get aggressive with savings

Tom’s family doesn’t have a mortgage, so they will be debt-free after their consumer credit is paid off later this year. To maximize his chances of retiring in a few years, Tom intends to max out his retirement accounts — the 401(k) and Roth IRA.

Ramsey Show co-host George Kamel recommends using the catch-up contribution room available to someone of this age. The IRS allows workers over the age of 50 to make additional contributions to their tax-advantaged retirement accounts every year.

Another retirement investment to consider is a gold IRA. Gold IRAs combine the tax benefits of a traditional IRA with the inflation-hedging properties of gold.

Goldco is an industry leader in precious metals, which have historically acted as a hedge against inflation.

By signing up with Goldco, you’re eligible to receive a free 2024 gold IRA kit to help you determine if gold is the right investment opportunity for you.

Tom also intends to sell the family home and downsize to boost his chances. Downsizing has become more difficult in recent years, however, and only 5% of people over the age of 65 report moving between 2016 and 2021, according to Bloomberg.

Instead of downsizing, Tom can explore ways to optimize his savings with conservative investments.

One option is CD Valet, an online CD marketplace that allows users to compare top certificate of deposit rates from various banks and credit unions nationwide.

Their extensive database shows the most competitive rates without bias, including daily rate updates and earning calculators to give consumers an array of free resources to help them find the right CD to meet their savings goals.

Despite these efforts, Tom’s goal of retiring by 65 might still be beyond reach.

Investing in a high-yield savings account could help mitigate this challenge by potentially delivering turns of 4%, compared to the standard savings APY of 0.01% offered by U.S Bank.

For guidance on choosing the best account for you, check out the Best High-Yield Savings Accounts of 2024.

Read more: Thanks to Jeff Bezos, you can now use $100 to cash in on prime real estate — without the headache of being a landlord. Here's how

It would be a quick turnaround

Approaching retirement with debt instead of savings isn’t unusual. U.S. Census data suggests that only 58.1% of baby boomers, older than 56, had at least one retirement account as of 2020. As for what’s in those accounts, by 2022, thosesomeone aged between 55 and 64 had a median debt balance of $90,000, according to data from the Federal Reserve’s Survey of Consumer Finances.

Even Tom’s spending spree after an existential crisis isn’t unusual, with 27% of American adults now “doom spending,” according to a survey by Intuit’s Credit Karma. Dreadful news about home affordability, inflation, geopolitics and climate change areis impacting the way Americans save and spend.

What is unusual is Tom’s determination to retire by 65. While the average age of retirement in the U.S. is 61, Tom’s lack of savings and debt totalling $26,000 will make it challenging for him to retire comfortably, to say the least.

If you want to pay downget a hold of your debt before nearing retirement, you should consider consolidating your debt through Credible.

Credible makes it easy to streamline your debt repayment at an affordable rate. Their online marketplace of vetted lenders provides personalized loan offers based on your needs, allowing you to pay off your debt more efficiently at a fixed rate — without juggling multiple bills.

Just provide some basic information and Credible will present you with a list of loan options to help you start paying down your debt.

However hard it will be, Tom isn’t waving the white flag yet. Instead, he’s determined to get back on track.

After paying off debt, Tom believes his family will have excess cash available to start saving. He has a plan in place, but called The Ramsey Show to find out where he should invest his savings to get the most returns.

One way you can start to incorporate savings automatically into your daily spending habits is through Acorns.

Acorns is an automated investing app that invests the leftover change from your everyday purchases into a diversified portfolio of ETFs. Acorns automatically rounds up the price of your purchase to the nearest dollar and deposits the difference into a smart investment portfolio for you, allowing you to grow your wealth without even thinking about it.

It takes less than five minutes to sign up – all you have to do is link your cards and start spending as usual.

Sign up now and you’ll get a bonus $20 investment.

What to read next

  • 'You didn't want to risk it': 80-year-old woman from South Carolina is looking for the safest place for her family's $250,000 savings. Here's Dave Ramsey's response

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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