Retirement

The Completely Tax Free Roth IRA: Strange Ways to Save

June 9, 2010 By Jennifer Derrick 9 Comments

SavingAdvice is starting a new column that’s going to look at strange, offbeat ways to save and make money. Anything that’s a little odd, uncommon, or contrarian is fair game – as long as it’s legal.

You probably already know about Roth IRA’s. These are IRA’s that you fund with after tax dollars and then, when you retire, your withdrawals are tax-free. In contrast, regular IRA’s are funded with pre-tax/tax deductible dollars but you pay taxes on your withdrawals when you retire. The big draw of a Roth IRA is that you pay your taxes now, at what is likely to be a lower rate than will be in effect when you retire, and then during retirement you don’t have to worry about taxes. But what if you could figure out a way to avoid taxes on both ends? Is it possible to create a Roth IRA that carries no tax burden whatsoever?

I have a friend who is trying just such an experiment. He is funding a Roth IRA with money that is not subject to taxes. He’s putting in all his gifts, money found in the street, rebates, credit card cash back, and other money that isn’t taxable income into this Roth IRA. He’s funding the account with money on which no taxes have been taken out. When he retires, he will not pay taxes on his withdrawals, either,
making this account completely tax free. So far he’s managed to accumulate about $5,000 in this IRA, including the interest he’s earned from his investments. With about twenty years to go until retirement, he could have a nice chunk of money in this tax-avoided account.

Is such a thing ethical? You could argue it both ways. You could say that he is cheating the system by operating against the spirit of the Roth rules. However, I would say he is being smart. He is careful to make certain that the money he puts into this account is not subject to taxes, so he’s not breaking any laws to my knowledge. He’s putting his gifts and found extra money to good use. Rather than dropping this non-taxable money into a regular savings account where the earnings are subject to taxes, he’s using it to best advantage, protecting any earnings from future taxes.

Now, obviously my friend does not intend to retire on just this money alone. It would be nearly impossible to gather together enough tax-free money to provide a comfortable retirement. Unless you have a lot of people giving you big gifts, you need another plan. My friend has other retirement accounts that will provide the bulk of his income. This is merely his attempt to “stick it to the man” by avoiding taxes on his retirement income as much as possible. When he retires, he will have a least a small amount of money on which he has never and will never pay taxes.

Dave Ramsey Financial Peace University Review: Week 10

April 22, 2010 By Maggie Ellis 2 Comments

This week we moved on to Baby Steps Four and Five, which are saving for retirement and saving for your kids’ college education. Baby step four was on deck first, which is to save 15% of your household income in tax-advantaged plans. Dave points out that, at the time this class was filmed, 53% of all workers had less than $25,000 in retirement vehicles. Further, when asked how they plan for retirement, 44% said that they guess at the amount they’ll need and the investment products to use. Those are some scary numbers. Most people figure retirement’s too far away or they’re too busy living for today that they “forget” to take care of their future. Big mistake. Since pensions are almost a thing of the past and Social Security cannot be counted on, most of these people are going to have a hard time making ends meet in retirement.

Dave spends the first part of the lesson discussing the most popular retirement products, including the 401(k), IRA, SEPP, and other speciality plans like 403(b)’s and 457’s. The most commonly used are the 401(k) and the IRA (and it’s cousin, the Roth IRA). The point of any of these plans is to use tax-favored money to save for your retirement. You’re either putting in pre-tax money and allowing it to grow tax free (IRA, 401(k)), or you’re using post-tax dollars that will grow tax free and not be taxed when you withdraw the money (Roth IRA).

Dave strongly advocates for the Roth IRA. In a Roth IRA, you invest after-tax money but your earnings grow tax free and you are not taxed on any withdrawals when you retire. There’s also a little more flexibility with a Roth in terms of early withdrawals without penalty. Dave argues that you have more investment choices with a Roth, also. That’s probably true when compared to a 401(k) that offers only a few funds, but you can open a traditional IRA at any brokerage and have access to thousands of funds and stocks, just like with a Roth. The ability to withdraw money tax free after you retire is the big draw. If you’ve saved a lot of money, you’ll likely be in a higher tax bracket when you retire since most of your deductions will be gone and you may be pulling in more per year than you did when you were employed. If that’s the case, tax free withdrawals are great news.

Related Articles

Dave Ramsey Financial Peace University: Week One

Dave Ramsey Financial Peace University: Week Two

Dave Ramsey Financial Peace University: Week Three

Dave Ramsey Financial Peace University: Week Four

Dave Ramsey Financial Peace University: Week Five

Dave Ramsey Financial Peace University: Week Six

Dave Ramsey Financial Peace University: Week Seven

Dave Ramsey Financial Peace University: Week Eight

Dave Ramsey Financial Peace University: Week Nine

Dave Ramsey Financial Peace University: Week Ten

I have nothing against the Roth, but I don’t believe in it as strongly as Dave does. I just cannot imagine that in the thirty years I have until retirement that the government will not find some way to tax those withdrawals. I cannot see them letting that large pool of money remain untouched. I think it will be at a low rate, but I think it will be taxed. There was a time when Social Security earnings were tax free and that is no longer the case, so the government has proven to go back on its promises. I prefer to hedge my bets and use a regular IRA. Yes, I’ll have to pay taxes when I withdraw the money, but at least for now I’m able to reduce my taxable income each year. Since I hover right on the brink of a higher bracket, that reduction in taxes now is worth more to me than a promise that might not be honored by the time I’m retirement age. You might consider using both types of IRA’s and taking some deductions now, while hoping for tax free withdrawals later.

After discussing the types of retirement plans, Dave offers a reminder to roll your retirement money directly into another qualified plan if you leave your job. Never touch that money or you’ll have to pay taxes and penalties on it. You want it to roll seamlessly into another plan. He also counsels us to never borrow against retirement money. Not only do you lose out on the compound interest, but any loans must be repaid within 60 days of leaving your job. If you can’t repay it, you’ll be taxed and penalized on that money.

As far as what to do with the 15% of your income that you’re saving, Dave suggests this order:

1. Fund your 401(k) or other work plan up to the amount that your company will match.

2. Above the matched amount, or if the company does not match at all, fund Roth IRA’s up to the amount you’re allowed by the tax code.

3. If you still haven’t hit 15% of your income yet, go back and put the remainder into your employer’s plan.

His plan isn’t a bad one. It gives you a good distribution of your assets in plans that use both pre- and post-tax dollars and which have different tax structures for the withdrawals. If you don’t have a plan at work, I would suggest putting some money into a regular IRA and some into a Roth. That way you get the same type of tax structure.

Dave then moves on to saving for college. This part of the lesson is very short. He advocates using an Education Savings Account (ESA which is like an IRA for education. You invest pre-tax money into the account and the money is taxed when it’s withdrawn. If you can’t use an ESA, then Dave recommends a 529 plan. Just make sure that you stick with one that gives you complete control over the money and does not make any type of automatic adjustments based on the child’s age. Dave does not recommend using any other savings products including insurance, savings bonds, or pre-paid college tuition plans. Most of these simply don’t make the returns you’ll need to adequately grow your money. Some are also ripe for scammers.

You should do Baby Steps 4 and 5 concurrently, which is why Dave caps the retirement savings at 15% of your income. Ideally that leaves you with some left over to put away for college. Dave does not say this, but I will. If you are older and need to really catch up on your retirement savings, I say skip the college savings and put as much as you can into your retirement. Kids can find work, scholarships, and financial aid to pay for college. You can’t find aid to pay for retirement. Similarly, if you don’t have kids and don’t plan to, go ahead and funnel as much extra as you can into retirement. Don’t just accept the 15% cap. The more you can save, the better off you’ll be.

In small group we talked a little bit about our fears for retirement. We have several people in our group who are in their late forties and fifties, so this is a topic that scares them. Several of them admitted to being below even the reported average of $25,000 in retirement, with no pensions to pick up the slack. A couple of them admitted that they just never gave it much thought until now. They were so busy raising kids, working, and building a life that they let time slip away. They are like the people Dave brought up in the beginning of class who just live for today without much conscious thought for the future. They’re worried now that they won’t be able to retire or, if they can, that they won’t be able to have any fun. They mentioned that, having gone through this class, they are committed to saving from this time forward, but they worry that time has run out and that they’ll never be able to save the kind of money that will give them a good retirement.

From there we talked about what motivates you to get serous about retirement. Every single person in the room listed total fear as their primary motivator. Fear of having to work at Wal-Mart until they die, fear of living on state assistance, fear of not getting the health care that they need, fear of eating Alpo in their old age, and fear of not being able to do anything that they want to do. Fear is a powerful motivator, no doubt. Now that many people in the class are considering this seriously for the first time they are realizing just how far behind they are and how the safety nets they assumed would be there (pensions, Social Security) just aren’t going to be there. It’s scary stuff. Our group leader suggested we try to think of some positive motivators for planning for retirement, just so that terror isn’t the only reason. We came up with wanting to have fun, wanting to give to good causes, wanting to be able to help grandchildren, and wanting to leave a life changing amount of money to our heirs.

We also talked about why it’s a bad idea to borrow from or cash out a retirement vehicle to pay off debt, no matter how much you may want to be out of debt. One man in our class took out a 401(k) loan and used it basically as a debt consolidation tool. He paid off all his credit cards and high interest loans with it to the tune of about $40,000. This worked well until, two months later, he was laid off from his job. That loan was due within 60 days or he was going to have to pay the taxes and penalties on about $38,000. Ouch. He tried all he could to raise the money, but given that he was already living on the financial edge, he couldn’t do it. That 38K was considered income by the IRS and he had to pay the tax bill, plus the penalties for early withdrawal. He ended up losing a big chunk of his money, not to mention the amount of compound interest he lost by moving the money out of the account in the first place. It was an expensive lesson to learn; one from which he is still trying to recover.

As most of the people in the class are older with grown kids or no kids, we didn’t talk much about the college saving aspect of the lesson. However, we did wonder about the amount of guilt people feel if they don’t save for college. Many people put college savings before retirement because they feel so bad about it. But we talked about how a kid can work through school, or get loans or scholarships, whereas a parent has to fund his or her own retirement with no help from outside sources. The parents have to take care of themselves, first.

If you remember, last week we had to do the worksheet that showed how much money debt is robbing from retirement (or other long term goals). The results came up in group and they were eye opening. A quick calculation (using Dave’s charts) of the average in my class showed that debt has cost each person in that room about $2 million dollars in retirement money. The numbers will continue to grow until all of the debt is paid off so the total in the end will be much higher, assuming that it takes most of them several years to get out of debt. One woman said that this exercise motivated her to get out of debt more than anything else in the class so far. She’s probably in her mid-forties, so retirement isn’t that far off. once she saw how much she’d lost over the years, she got very scared and then very serious about paying off debt. Good for her!

This was one of those weeks where we had a really good discussion. Retirement is one of those things that everyone has an opinion on. It’s also something that scares and intimidates many people. I think this weeks’ discussion ended up being like a therapy session for many. It gave them a chance to air their fears and talk with others who are in the same boat. Maybe it made it seem a little less scary.

Homework roundup: This week we have to complete the monthly retirement and college planning forms to determine how much money we should be saving towards these goals. This is to give us a definite number to shoot for instead of just guessing, which is most people’s method of calculation. I don’t have kids so I skipped the college funding worksheet.

The first step in this exercise is to determine what sort of annual income you want to generate in retirement. I shot high and said $100,000. I’d like to travel a lot and I know that medical care and inflation are going to eat away at any income I have, so I aimed high. I doubt I’ll really need that much but I’d rather aim higher than lower.

We then divide that number by .08. The .08 comes from the idea that you are saving at a 12% return, but inflation is 4%, giving you a net gain of 8%. (As I said last week, I think his returns are high, but since this is homework I’m using his numbers.) Using this formula, my target number is $1,250,000.

To figure out your monthly savings amount, Dave has you multiply your target number ($1,250,000) by an 8% factor that matches your age (he provides a table that lists the factors at every five years of age, starting with age 25). Since my age falls slap in between two factors, I did this calculation twice. I need to be saving between $838 and $1,313.75 per month to reach my target number. The higher figure assumes the older age, while the smaller figure assumes the smaller age. Turns out that, according to Dave’s formula, I’m right on target. I currently save $1,227 per month in tax-advantaged accounts (the maximum I’m allowed by law based on my compensation) and another $300 per month in regular investment accounts for long term savings. So I’m at just over $1,500 per month or ahead of Dave’s calculation.

Lastly, if you aren’t interested attending the course yourself, consider picking up the Dave Ramsey Financial Peace University DVD Home Study Kit (9 Week Course) 2012 Release. It sells for between $185.00 and $200.00 on Amazon. This is pretty good deal when you factor in the time savings relative to attending the full course.

Next: Dave Ramsey Financial Peace University Review: Week Eleven

This is a series of posts about what you will find in Dave Ramsey’s Financial Peace University course. You can find the previous posts here: week one — week two — week three — week four — week five — week six — week seven — week eight — week nine

A Life Without Debt: Procrastination Is The Enemy

October 6, 2009 By Sadie Morris 8 Comments

Over my years of debt free living I’ve learned that procrastination is a huge enemy to staying debt free. We all tend to say, “I can take care of that tomorrow,” and put off things we don’t want to (or can’t) deal with right then. The problem is, the longer you put things off, the more they end up costing you, both in terms of money and in terms of leaving gaps in your overall financial situation that can cause you to spend more money later. Put off too many things for too long, and you’ll soon find yourself in a financial mess and on the road to debt. Let me show you some examples of areas where procrastination can cause big trouble:

Home maintenance: The roof has lost a few shingles. You decide not to fix it right now. It rains. The roof leaks and water collects in your attic, wetting your insulation. Leave it unattended much longer and the water is going to damage your ceiling and come through into your house. Now, what would have cost you a couple hundred dollars at most to fix is going to cost thousands. It’s the same with the furnace that is making funny noises. If you call for repair right then, it might cost you a couple hundred to fix. Wait until the thing shorts out and starts a fire and you’ve got a bigger, more expensive problem. Keep on top of repairs and, if possible, head off trouble before it starts with good routine maintenance and troubleshooting.

Car maintenance: The engine is making a strange noise You keep driving it for a few more months. Then the head gasket blows and your entire engine is shot. Had you dealt with this in the beginning, a couple hundred dollars probably would have covered it. Now you’re looking at thousands, or a new car. The same is true for squeaky brakes, engine lights that come on, and fluid indicators that show you’re low. Don’t ignore them. Get it fixed before it costs you more money.

Financial paperwork: You keep meaning to write your will or buy that life insurance. You swear you’re going to increase the coverage on your homeowner’s policy to cover your new addition. But you never get around to it. Then disaster strikes and your insurance won’t pay or your estate is turned over to the State. Had you just taken care of these things, you and your family would be all set. As it is, you face increased repair or legal costs and a lack of insurance money to draw upon.

Retirement savings: You keep saying you’re going to start that IRA or contribute to the 401K at work. But somehow, you never quite get there. Now you’re sixty and looking retirement square in the face. You have no money, so your plans are either curtailed or you’re living on the bare minimum trying to sock as much as you can away before your job forces you out. At worst you’re looking at financing your retirement on credit cards or reverse mortgages, or you’ll be working until you die. But had you just started putting in a little money each pay period years ago, you’d be comfortable.

Emergency fund: How many times have you promised yourself that you’ll use the next tax refund or raise to start that emergency fund, and yet you chose to go to Bermuda instead? Then you have an emergency or lose your job and everything has to go on a credit card. If you had that emergency fund, you might not have to finance the problem. You could pay cash. If you had started that fund years ago when you meant to, you’d be all set to weather life’s down periods.

Bill payment: The bills come and you stuff them in a drawer, intending to pay later. But you get busy and forget. Then come payment time you’re either late or you discover that the money for the electric bill was spent on that weekend beach trip. Now you’re looking at late fees, service charges, bounced check fees, and possibly having your service cut off. Had you just paid when the bill came, you’d have only paid the amount owed.

Health care: You put off your annual physical and vaccinations. You put off starting that diet and exercise program. Then one day you don’t feel so good. The doctor tells you that you have cancer or heart disease and that, had you come in a year ago, they could have done more for you. As it is, you’re facing costly treatments and an uncertain prognosis. Had you just gone ahead and taken care of yourself, you might have been spared the financial and personal pain.

Balancing the checkbook: The statement comes and you don’t balance your checkbook. Months go by and you don’t bother. Then one day you discover you’re out of money and you don’t know why. So you dig out your old statements and start to balance. A combination of math errors, new fees being charged by the bank, and overspending on your part have robbed you of your money. Now you’re facing bounced check fees and overdraft charges. Had you just balanced your books once per month, you would have caught the math errors and had a chance to do something about the fees. You could have also identified spending that was getting out of hand.

When you procrastinate you open the door to debt. Things that only cost a little when dealt with quickly end up costing thousands that you don’t have. And then they get financed. You may think you’re saving money by not addressing a problem right then, but failure to deal with it is likely to cost you a lot more in the long run. If you want to live debt free, you have to conquer procrastination. Get organized, set up a system for alerting you to things, and get in the habit of dealing with things as they come up. You’ll not only sail through life a lot easier, you’ll likely have far less debt.

What Happens If I Can’t Retire?

September 9, 2009 By Jennifer Derrick 9 Comments

In financial circles the big push is to get people to save enough money so that they can retire in comfort. That’s a noble goal, but the fact is that more and more people aren’t going to be able to retire, at least not in the way that they dream about. Pensions are a thing of the past, Social Security is iffy at best, and many people simply haven’t saved enough to cover both ridiculous health care expenses and a life of leisure.

We all dream of the life of leisure, the daily golf game, and the fantastic trips, but reality is likely to be somewhat different than our dreams because the money just won’t be there. Nobody wants to talk about what happens at that point. So what happens if you arrive at your retirement age, or you get close, and you discover that you don’t have enough? What can you do, beyond saving as much as possible?

The most obvious answer is to work longer. Putting off retirement for even a couple of years gives you a chance to save even more money. You don’t have to work at your current 9 to 5 job, either. Maybe you take this opportunity to start your own business or take a job in a field you always wanted to try. If you have to keep working, no one says that it has to be in a job you hate. In fact, continuing to work well past retirement age, even if only part time, not only allows you to save more money, it may save your sanity. We all think we want to quit working but a lot of retirees, after living the life of leisure for a couple of months, find that they are bored and that they miss making a contribution somewhere. They miss the socialization, too. If you can find work that you love, you may find that you prefer to keep working.

The other thing you can do is to adjust your expectations for your retirement. In other words, get real with yourself. If you know you don’t have a lot of money, don’t delude yourself. Don’t retire and then go on a binge of trips and leisure activities and drain your resources within the first five years of retirement. Adjust your expectations downward. Realize that you can’t take five luxury trips a year and be happy with one budget trip. Realize that you may have to work and find a way to be okay with that. Accept that you may have to sell the big house and move to a condo. Don’t dwell on what cannot be or waste your remaining time asking “what if.” Get out there and do what you can, but be realistic about it and accept that maybe you have to reduce your expectations a bit.

Retiring into a life of leisure is a fairly recent concept. Our grandparents worked until their health failed and they had no choice but to stop. Maybe they scaled back on their hours, but they still worked. The idea of simply sitting around and doing nothing or traveling full time is a new idea (made possible by a marketing machine that wants to push seniors into all kinds of activities) and it’s an idea that simply may not be possible or even advisable. We live longer now and if you retire at sixty-five, your money may very well have to last thirty years. Unless you have a lot of money, the retirement ideal that is pushed by the marketers is a distant dream. Thanks to rising health care costs, even with the best savings habits in the world you may still not have enough to support yourself without working at all for the remaining years of your life. And if you can? Great, but keeping yourself active and involved in something is likely to keep you healthy and mentally strong much longer than doing nothing but playing golf all day.

The better answer may be to gradually phase working out of your life. Maybe at sixty-five you trade in the 9 to 5 desk job for a job in a museum or something else that you really enjoy. Or you piece together a couple of part time jobs. Then at seventy you scale back to part time hours. At seventy-five, maybe your income comes from a hobby that you can pursue at home and turn into a little cash. Maybe you work at that until your health prevents you from working at all. You can still have some of the joys of retirement on such a plan because you’re working a “job,” no longer chasing a “career” that sucks up all of your time. You can travel and spend time with the grandkids, but still have some money coming in on the side while keeping yourself engaged in society.

Certainly you should strive to save as much as you can during your prime earning years. Whatever your “retirement” consists of, you can bet that big health care expenses are going to be part of it and you’ll want enough money to take care of yourself without subjecting yourself to government assistance. But if you end up having to work a little longer than you hope or you end up with a smaller retirement budget than you dream of, it doesn’t have to be the end of the world. There are positives to a “retirement” that still includes work.

How I Retired Early

August 21, 2009 By Guest Writer 16 Comments

By Retire@50

It’s the dream of many to retire early. This is how I did it:

I had a paradigm shift: It was the early 80s and I was in my early 20s. I was working an entry level job and living paycheck to paycheck. It was difficult to find jobs at the time and I was always living in fear of What if

A Life Without Debt: Building the Retirement Nest Egg

August 11, 2009 By Sadie Morris 8 Comments

Debt free living has one important benefit that many people don’t consider at first. Sure, it makes bill paying easier and it lets you save for vacations and other fun things, but it also lets you save big sums for retirement. When all of your money goes to servicing debt, not only can you not pay for things like vacations, new appliances, or cars, you also can’t save for retirement. Or, if you can squeeze out a little for retirement, it’s probably not enough to meet your future needs.

Many people have no idea how much money they’ll really need to retire in the way that they dream about. Maybe they’ve run a calculator or two, but chances are they haven’t given it serious thought. They just assume that it will all work out somehow, so they continue to buy things on credit, figuring that paying the monthly payments is enough. Saving will come another day.

Of those that have given retirement serious thought, many of them still aren’t saving enough. They continue to rack up the debt thinking that they’ll save for retirement “later.” Do you know how fast “later” sneaks up on you? One day you’re twenty-five and then the next you’re forty. And from there it’s not far to sixty-five. Then you look around and think, “Huh. I have to keep working because I don’t have anything saved.” If you had started at twenty-five, you’d have a nice little nest egg to draw on.

The thing is, even a couple hundred thousand dollars isn’t going to cut it, especially if you have health issues or you want to travel a lot. To live in any kind of comfort for more than a few years, you’re going to need at least a million dollars. And more is better. Fidelity reports that the average 401K balance is only $62,000 which is nowhere near enough money. Even if some of that average is made up of young workers with years to go before retirement, the average is also made up of many who are closing in fast on retirement. That $62K isn’t going to last a year if you do any kind of spending.

Sure, you may have Social Security benefits coming in (but I wouldn’t bet on it) and maybe a home you can sell for a profit, but where is the rest of that money going to come from? Most people seem to assume some sort of magic will happen and money will appear. So they continue to finance large and small purchases, living only for today and heedless of the distant future. It’s not that most people don’t have a desire to save, it’s just that they prioritize so many things above it that it never gets done. The cruise vacation, the bigger home (when the old home was fine), the upgraded appliances (when the old ones still worked), the nicer cars, and the bigger TV’s all come at the expense of saving for the future. By the time they’re done improving their lifestyle of today, there’s nothing left for tomorrow.

I hear people say, “Well, I might not live to retirement and I don’t want to miss out on the fun in life.” I’m not saying that you can’t have any fun in your youth and that you have to only plan for the future. I’ve had tons of fun, but only fun that I could afford to pay cash for at the time. I pay my bills, then fund my future needs (short and long term), and then have fun with what’s left. Yes, there have been some years when I didn’t have a lot of fun because there wasn’t enough money to go around. Yes, there were years when I made that appliance stretch a little further and prayed that the car would last. I don’t get to do or have everything that I want when I want it. I have to choose between options and sacrifice something in order to get something else. But I’ve always known that I’m going to want to quit working one day and have other kinds of fun. And when I’m too old for fun, I want good care in good facilities. I don’t want to be at the mercy of the State. I’ve laid my plans with those goals in sight and sought balance between fun now and in the future.

Being debt free has allowed me to amass a nice nest egg and I’m not yet 40. I’ve been able to contribute to 401K’s, IRA’s, and now a SEP. I’ve also saved some money in non-retirement accounts and CD’s. In less than five years from now I will have reached my retirement goal, thanks to starting early, aggressive saving, and the power of compound interest. I might scale back my savings some then, but I’ll still keep adding to it because I don’t want to be caught short.

How is this possible? How can I be so relatively young and so close to my retirement goal? No debt. When others were throwing money at car payments, I was driving a beater and banking the money. When my friends moved out of their starter homes and traded up to McMansions, I stayed put in my adequate house and banked the money. When we got raises, we banked most of them and continued to live on less than we earned. When my friends went on four resort vacations a year, I went camping or visited family. When others were putting in stainless steel appliances and granite countertops, I stuck with the basic laminate counters and white appliances and banked the money. I’ve upgraded my lifestyle over the years, but very slowly. I don’t want to be retired and living in a crummy nursing home with only memories of fabulous granite countertops to make me feel better. I’d rather have that money for my care.

It’s not too late to do something about your retirement situation. Pay off all your debt and you’ll be amazed at how much cash you can suddenly throw at your future while still having some fun today. All those monthly payments can become contributions to your 401K or IRA. Debt holds your money hostage. Sure, you might be having fun now, but is it going to be fun in thirty years when you’re living in an assisted living facility and at the mercy of Medicaid? No one else can pay for your retirement and if you want to be comfortable and happy, you’re going to have to come up with a lot of money. Being debt free is the best way to get there.