We want to retire in about 5 years, but we have $150,000 in credit card debt and loans and $1.4 million stuck in retirement accounts — “we really want to be retired”

I am try to get outside advice on the possibility of retiring in the next 5 For 7 years. I amI have to work until I’m 59.5 to be able to start using the retirement funds.

We have about $1.4 million in 401(k) and Roth accounts, $30,000 in stock, a rental house we owe $245,000 on that brings in $1,700 a month and pays for itself , A shorttterm rental on which we owe $158,000 and brings in about $48,000/year (net between $10,000 and $15,000 depending on expenses). We own our own house with no mortgages and no car payments.

We currently have two children in college and we pay their tuition.

The albatross around our neck is $150,000 in credit card debt and unsecured loans. The world has gotten expensive and our spending has gotten out of control. We have most of them at low interest rates, but it’s still a crushing amount that we try to reduce and pay between $2,000 and $3,000 per month. We make between $225,000 and $250,000/year combined, and the range depends on my commissions at work.

Our plan is to use any work bonuses and profits from short-term rentals to pay off the debt. That could be around $20,000/year. Also use Mint to budget and set goals to pay it all back using the snowball approach.

Every vacation we take, we save the money in cash and then pay the expenses immediately with that money.

I’m afraid I’ll have enough at retirement age (were 52 and 51 now). My wife says I put too much pressure on myself about money, but when we stop working, we don’t plan to work part-time. We really want to be retired.

See: I’ll be 60, I’ll have $95,000 in cash, and I won’t have any debt – I think I can retire, but financial seminars ‘say otherwise’

Dear reader,

Life is bound to throw you off course sometimes, and as you well know, those detours can be quite expensive.

The fact that you have saved so much for your retirement and also have additional sources of income is wonderful. Debt, as you also well know, is a problem.

Retiring with debt isn’t a bad thing on its own, that is, depending on the type of debt you take with you into retirement. For example, a reasonable mortgage is usually not a problem if future retirees can accept it and have a payment plan in place, but credit card debt should often be avoided whenever possible. Given how much you and your spouse earn each year, regardless of bonuses or short-term rental benefits, your main goal should be to completely eliminate this debt before you retire.

Don’t miss: Should you get out of debt before retiring? Here’s what you need to know

Take a look at your current expenses first and see if you can find even more extra money to save. If you don’t, why not? If it’s not out of necessity, review your expenses and see if there’s anything you can cut.

As unpleasant as this suggestion may be (and I apologize in advance), you might also want to wait for your next vacation…or take a cheaper one for now. Saving cash for your vacation and paying it off immediately is a fantastic strategy, but if you were to cut those costs once or twice, you could spend that money on your debt and see the balance go down faster.

That’s not to say you should deprive yourself of all your joys, or that you shouldn’t take a vacation for the next 5-7 years until you retire, but maybe you can find a trip to take closer. from your home, or make a stay. There may be a town nearby that you have never explored before and you can take a day trip there. Or treat yourself to a few dinners out, walks along the beach or on a hiking trail, etc.

If you’re diligent about paying off your debt, you might want to transfer some of it to a zero-rate credit card. There are a few that you might find with long promotional periods, like around 18 months. There is a caveat to this plan though – you need to be able to pay it back within the time frame for zero interest, otherwise you will pay high interest. Consider calculating the amount you know you can definitely pay per month and multiplying it by the number of months you benefit from the zero rate promotion. Then transfer that large chunk of your debt to the zero rate credit card and make sure you pay it off every month.

Here are some additional suggestions from the Federal Trade Commission on how to get out of debt, either on your own or with the help of a credit counselor.

Mint is a great tool, and budgeting is even better. Congratulations to you and your spouse for keeping control of your finances and focusing on paying off your debt.

These rentals are a great source of income, but when calculating how much you’ll need in retirement, be sure to fund your emergency savings accounts for all of your properties. You never know, but you don’t want to find yourself in a situation where you have to fix two or three roofs instead of just one for your primary residence. Also keep in mind that there may be times of vacancy or problematic tenants. Budget for it.

Read the MarketWatch column “Retirement Hacks” for practical advice for your own retirement savings journey

There’s no magic number to determine how much you need to save for your retirement, but now that you’re less than a decade away from retirement, you can see a clearer picture of what your retirement could be. look like (and cost). Get all those numbers in order and make some financial backup plans so your retirement isn’t ruined by the unexpected. Use a few rates of return and inflation to get an idea of ​​how they will affect your retirement spending, savings and taxes. Think about how much you intend to withdraw from these accounts and how this percentage will affect your balance at the end of the year (especially during periods of volatility or market downturn).

Just to be sure: the amount you’ve already saved matters — not everyone has that much when they retire, or even half of it — so don’t forget how far you’ve already come.

I may be biased as a retired journalist, but I don’t think you’re wrong to worry about your finances in retirement. Of course, you shouldn’t be stressed to the point that you can’t eat or sleep, but if you’re just trying to do the math and make sure you and your family are comfortable in your old age, there’s no harm in that. This is especially true if you intend to stop working altogether with no possibility of part-time or side money to earn in retirement. And if you still have debt, it will weigh on you financially and emotionally.

Readers: Do you have any suggestions for this reader? Add them in the comments below.

Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com


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