A WORRIED caller on The Ramsey Show shared his fears after saving just $30,000 at age 51.
To make matters worse, he was facing dismissal from his well-paying job.
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Jeff from Cincinnati, Ohio, called Dave Ramsey for help with his retirement situation.
The 51-year-old only saved $20,000 for his retirement in a 401(k).
Unfortunately, a major savings obstacle was looming for Jeff.
“I work in a dying industry and our factory is going to close,” he told Dave.
“The longest it will remain open is 2027, but it could close before then.
“I’m just wondering what should I do so I can retire more easily?” he asked.
Jeff was earning $165,000 and planned to start a greenhouse business after the factory closed.
But he estimated it would only earn him $40,0000 to $50,000 a year.
“It’s not really going to help you build a nest egg,” Dave pointed out.
On the plus side, Jeff had no debt and a fully paid off house.
However, for the financial guru, the solution was obvious.
TURN UP THE HEAT
He wanted Steve to save as much as possible over the next few years while still earning a high income.
“Since you have no bills and five years of this fabulous income, let’s turn up the heat, man.
“Maximize your 401(k), maximize your Roth IRAs.”
Dave pointed out that Jeff could save $45,000 a year by maxing out his and his wife’s 401(k) and individual Roth IRAs.
“Let’s turn up the heat and see how much money we can save over the next five years.”
Dave then told the caller how his money would continue to grow by investing in the market.
“Every seven years or so it will double, if it’s in good mutual funds,” he said.
With this methodology, Jeff could be a millionaire by age 70.
But he needed to start saving now.
“You will be in much better shape in terms of fitness when this factory closes to you,” concluded Dave.
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 Taxes are paid when funds are withdrawn in retirement.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.
RETIREMENT CRISIS IN AMERICA
While Steve’s situation is far from ideal, it is also very common.
In 2022, nearly half of American families have no savings in retirement accounts, according to the Survey of Consumer Finances.
The average 401(k) balance is $48,301 for a person ages 45 to 54.
Dave previously told a 70-year-old caller without a pension that their car would be the solution.
And see why even $1 million might not be enough for retirement.
This story originally appeared on The-sun.com read the full story
