A DISTRESSED caller to The Ramsey Show has revealed her fears about retirement despite having a sizable household income.
Dave Ramsey revealed that she and her husband would have to make one major lifestyle sacrifice to enjoy their golden years.
Ruth from Cincinnati, Ohio, called in to The Dave Ramsey Show, looking for help with her retirement worries
“I’m wondering if it’s too late for us to retire before 70, because we don’t have enough money in retirement,” said the 61-year-old.
Ruth explained there was only $76,000 in their 401k, and they had a total of $200,000 debt including the mortgage, car payments, and credit cards.
Her husband was making $130,000, but they had been unable to save much.
“He makes way too much money for you to be this broke,” said Dave.
He noticed that there must be a spending problem in Ruth’s household, and suggested a strict move in the opposite direction.
“What you need to do is get on a beans and rice, scorched-earth budget, and get this stupid car and these credit cards all paid off as fast as possible.
“Build you a emergency fund and then lay into that 401k good and heavy at 15% of your income.”
MAJOR SACRIFICE
This extreme budget would involve the sacrifice of one big luxury for Ruth.
“You really are not gonna go on vacation at all ever again until after you retire,” warned Dave.
“Oh my,” she said.
The guru explained: “You’re way behind and you need to get your house paid off, get these debts paid off, and throw another $100,000 or $200,000 in.
“If you keep spending like you’ve been spending and you stay disorganized like you have been, you’re gonna retire on dog food,” he added.
HOW MUCH SHOULD YOU SAVE FOR RETIREMENT?
Dave believes at least 15% of your income should be saved for retirement.
But that comes alongside other important financial goals like building an emergency fund and paying off debt.
He calls this method the Baby Steps, which are as follows:
- Save $1,000 for your starter emergency fund
- Pay off all the debt (except the house)
- Save up to 6 months of expenses in an emergency fund
- Invest 15% of your household income for retirement
- Save for your kids’ college fund
- Pay off your home early
- Build wealth and give
See what Dave recommended for a 46-year-old with no retirement.
And find out the answer to 13 important Social Security questions that can stop you from making “tragic mistakes.”