Dave Ramsey suggests how pensioners with no savings can ‘retire with dignity’
On a video posted to The Ramsey Show Highlight Youtube channel in 2014, Ruth called in asking for guidance, as she was scared that she and her husband, 60, did not have enough saved to retire by 70. Whilst doing her own research, she found out that she would need at least $700,000 (around £521,287) to retire, but they did not have this kind of money.
They had debt and a little bit in their 401k savings (pension vehicle), she told the money guru.
Ruth explained that their car still had a $10,000 (around £7,446) repayment cost, and that they had $2,000 (around £1,490) of credit card debt to pay.
They also owed around $137,000 (around £102,076) on their house.
Ruth did not work, but her husband did. He was earning around $130,000 (around £96,861) per year.
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Offering suggestions, Dave said: “He [Ruth’s husband] makes too much money for you guys to be this broke.
“What you need to do is get on a beans and rice scorched earth budget and get this stupid car and these credit cards paid off as fast as possible.
“You need to build your emergency fund and lay into that 401k good and heavy, and save 15 percent of your income in it.
“You are way behind and you need to get your house paid off, get these debts cleaned up and throw another $100,000 or $200,000 (around £74,486-£148,976) in.
“The good news is you make $130,000 (around £96,861). I was scared to death that you were going to say he makes $32,000 (around £23,842) a year.”
Ruth’s husband has been making six figures for the past five years, but Mr Ramsey stated it doesn’t matter because they have nothing to show for it, except “a stinking car payment” and “no money”.
He continued: “I don’t know where you’ve been spending it but it’s over.
“For your sake, you need to get on a written budget.”
He explained that if he was in their shoes, he would first of all pay off all the car debt and credit card debt. Then he would focus on saving an emergency fund of three to sixth months’ worth of expenses, then he would put 15 percent of his income into retirement and then focus on paying off their mortgage.
Once the house is paid off, they can focus all their money on retirement.
He added: “If you keep spending how you’ve been spending and you’re this unorganised, you will retire on dog food.
“If he works another nine years with that income you will have $500,000 (around £372,542), a paid for house and no debt, but you’re not going on vacation or going out.”
Mr Ramsey suggested that Ruth also tries to get back to work so she can add some money to the situation.
He explained that they will be able to turn this thing around however they will need to “get very serious today”.
He stressed that the only way they can “retire with dignity” is if they ensure they do not buy anything.
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