A 65-YEAR-OLD MAN with a mortgage and just $200,000 saved for retirement sought advice from expert Dave Ramsey.
The money guru gave you two goals to save your golden years from financial failure.
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Anita from Pensacola, Florida, called The Ramsey Show for help with your difficult retirement dilemma.
At age 65, she still had a mortgage balance of $63,000 and just $200,000 for retirement.
Anita said she wanted to retire at 70. She and her husband earned a total of $75,000 a year.
However, she wasn’t sure whether paying off her mortgage or saving more for retirement should be her priority.
Dave told Anita that she needed to pay off her mortgage and save a larger nest egg before she could retire.
He gave her a goal of paying off her mortgage in three years, which would mean paying $21,000 a year — almost $2,000 a month.
“You stabilized your golden years by paying off your house,” said the money sage.
Additionally, Dave wanted Anita to continue saving 15% of her income for retirement.
These two goals would represent 43% of her and her husband’s combined pre-tax salaries.
“You’re going to have to be on a tight budget and watch what you’re doing because this is important,” warned Dave.
“It’s very tight, tighter than you’ve ever lived. I know this because you don’t have a lot of money and you’re 65.”
If Anita followed Dave’s plan, she would be completely debt free in three years.
What’s more, the investments would likely increase the size of her nest egg while contributing 15% of her income every year.
After the house was paid off, Dave wanted Anita to also put the extra $2,000 a month towards retirement.
Where to save retirement money
There are several different places you can put the money you have saved for retirement. Each has different tax advantages, but not all 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 Taxes are paid when funds are withdrawn in retirement.
Roth IRA – an individual retirement account. Contributions are made after taxes, 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 obliges the employer to make payments to the employee upon retirement. Pensions are becoming increasingly rare.
‘80% BEHAVIOR’
“By age 70, you should have $600,000, $700,000 and a paid-off house if you do exactly what I told you.
“But if you mess around and keep messing with it, and keep making excuses, you’re going to have a mess, so you need to act like your hair is on fire next three years.”
Dave said personal finance is a matter of “80% behavior, 20% intellectual knowledge.”
“We just gave you 20% mental knowledge, now you have to do the behaviors, which, by the way, is the hardest part.”
See what Dave recommended for a 60-year-old caller without a pension.
And check out the answers to 13 important Social Security questions that can prevent you from making “tragic mistakes”.
This story originally appeared on The-sun.com read the full story
