FINANCIAL expert Dave Ramsey provided hard-hitting advice to a couple in Oklahoma City grappling with their precarious monetary situation.
At 70 years old and with no retirement savings, Janice reached out to Ramsey for help, and what he had to say was not easy to digest.
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“I have no retirement; my husband and I neither one have a retirement,” she admitted via a phone call to Ramsey.
Their financial landscape was bleak, with only $25,000 in cash and a $27,000 mortgage on a home valued at $250,000.
To complicate matters further, they also owed $1,000 on a roadster.
THE BREAKDOWN
Janice described her husband’s proposal to pay off the car and apply the freed-up cash towards their mortgage.
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However, she expressed deep concerns about their living situation, saying, “I don’t think I could even live in an apartment for what we would be paying a month on our home.”
The couple’s total income was $4,000 a month, comprising $2,000 in Social Security and another $2,000 from Janice’s physically demanding job cleaning homes.
Yet, as Ramsey pointed out, “We don’t know how much longer you can do that at 70 years old.”
HARD-TO-SWALLOW NEWS
After evaluating their situation, Ramsey delivered the harsh reality check that many viewers might find difficult to accept.
“I’m sorry, but the roadster is gone,” he said.
Selling their paid-off vehicle, which he estimated to be worth around $10,000, would provide the couple with funds to tackle their debt.
“You have $25,000 in a roadster to pull all this off,” he emphasized, underlining the urgency of their predicament.
Ramsey advised them to live as if they were “completely bankrupt,” stressing the importance of cutting unnecessary expenses to regain control.
He said, “You can’t eat out. You’re broke. Eating out is causing you to clean toilets.”
For Janice, who had mentioned that dining out was one of their few luxuries, this was a bitter pill to swallow.
Where to save your retirement money
There are several different places where you can put the money you save for retirement. Each has different tax advantages, but not all of them are available to everyone.
401(k) – an employer-sponsored retirement account. Contributions are made pre-tax and many employers will match a certain percentage of your contributions. Taxes are paid when the funds are withdrawn in retirement.
Roth IRA – an individual retirement account. Contributions are made post-tax but withdrawals in retirement are not taxed.
TSP (thrift savings plan) – a retirement savings and investment plan for Federal employees and members of the uniformed services. They work similarly to 401(k)s but may have more limited investment options.
Pension – an employee benefit that commits the employer to make payments to the employee in retirement. Pensions are becoming increasingly rare.
OTHER OPTIONS
The conversation took a crucial turn when Ramsey suggested a more drastic option: selling their home.
“If you sell it today, you’re debt-free,” he said.
He proposed that they could use the proceeds to purchase a more affordable condo for $100,000, which would alleviate their financial strain and provide them with a cushion of $100,000 to invest in their future.
While this solution might seem practical from a financial standpoint, Ramsey acknowledged the emotional toll it would take.
“Because with no debt at all you can make it,” he told Janice. “It’s not going to be pretty but you can make it.”
In other retirement news, a 56-year-old shared their situation, revealing their savings and plans while expressing anxiety over hearing concerns about potential “budget shocks” heading toward retirement.
Plus, YouTuber and financial expert Jacob Duke discussed a case wherein a couple in their 50s has $1.5 million in their savings, and he revealed what time period is essential to keep in mind before and after retirement
