A CALLER to the Dave Ramsey Show was nervous about her ability to adequately fund her future despite being debt-free.
The financial expert offered the 61-year-old words of wisdom as well as some advice on investing.
A woman called into the Dave Ramsey Show for retirement advice (stock image)[/caption]
The 61-year-old had $624,000 saved and no debt (stock image)[/caption]
Barbara from Springfield, Missouri, called into the Dave Ramsey Show worried about whether her savings were enough to retire.
“I’m thinking about retiring and I’m trying to figure out if I have enough money. I’m kind of scared,” said the 61-year-old bus driver.
Barbara shared that she had $624,000 in the bank invested across various accounts, including thrift savings plans, savings bonds, State Farm life insurance, State Farm mutual funds, and State Farm CDs.
She also noted that she had been debt-free since 2009.
Despite her financial status, Barbara was concerned if her savings would last her through retirement.
“I have plenty of money in the bank but you don’t know how long you’re gonna live,” she said.
Barbara explained that she had the opportunity to purchase five additional years of service from her job as a school bus driver, which would increase her monthly retirement benefits from $248 to $420.
However, it would take 10 years of receiving the higher payments to recover the cost of the purchase.
Ramsey noted that it was not a good rate of return and Barbara was better off investing her money.
EXPERT ADVICE
Ramsey said that if he woke up in Barbara’s shoes, he would begin to learn and research investments to extend the life of her money.
Ramsey suggested sitting down with a SmartVestor Pro, one of the financial experts vetted by Ramsey Solutions to receive advice on investments and long-term financial planning.
“Your job is not to become a financial genius. Your job is to understand the basics of investing,” said Ramsey, noting most of her investments could likely do better than they were in their current positions.
He suggested reallocating her money across growth, growth and income, aggressive growth, and international growth mutual funds.
He said that if Barbara could make a 10% profit on her savings, that would be $60,000 annually or $5,000 monthly.
“I bet you could make it on that,” he said.
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.
“As long as you’re not hitting the actual goose that’s laying the eggs, it lasts forever mathematically. If you don’t get into the $624,000 – if you only take off what it creates and live off that – it’ll create something every year.”
Barbara also shared that she owned a home on farmland worth $400,000.
“You’re what we call a millionaire bus driver,” joked Ramsey, impressed with her savings.
She shared that she was taught from a young age to not overspend and always lived as if she were on minimum wage.
Another couple in their 60s had $500,000 saved for retirement – an expert said they will make it they “stagger” their benefits.
Plus, a 60-year-old “YOLO’d” their money away and had no retirement saved – an expert gave them four steps to get back on track.
