A 47-YEAR-OLD caller to The Ramsey Show has shared her fears about retiring after saving just $200,000.
However, Dave Ramsey reassured her that her golden years would be secure if she could make just two changes.
Angie called into The Ramsey Show to get help with her retirement woes.
The 47-year-old from San Francisco, California and her husband had a “late start in life” when it came to making money.
They began saving 15% of their income into retirement a few years ago but had only managed to put away $200,000 so far.
That was equivalent to around one year of their household income.
However, Dave was able to quickly reassure his caller.
“You’re gonna be fine,” he said.
First, Dave told Angie she needed to firmly stick to her savings plan.
“You’re gonna save $30,000 a year until your house is paid for, and once it’s paid for, you’ll be maxing out everything and saving even more than that,” he said.
Secondly, the money guru pointed out that she and her husband would need to follow this plan for another 15 to 17 years.
In that time, the couple could build a significant nest egg.
What’s more, investing their savings wisely would keep the money growing over the years.
“The stock market has averaged 11% since it began,” said Dave.
INFLATION & AVERAGES
“That’s the average, so that’s the thing you wanna do.
“So you’re fine, based on rates of return. Just put that in.”
However, Dave reminded Angie that she would also have to factor in inflation, which is measured by the Consumer Price Index.
“The average Consumer Price Index for the last 72 years is 4.2%,” he said, speaking in 2022.
“So if you have $1,000,000 and it grows to $1,040,000 the next year, it would purchase about what $1,000,000 would have the year before.”
Dave recommends his callers save 15% of their income for retirement, which is part of his Baby Steps method.
Dave Ramsey’s 7 Baby Steps
Dave Ramsey advises his followers to follow a seven-step plan to save for emergencies, pay off debt, and build wealth.
Step 1: Save $1,000 for your starter emergency fund.
Step 2: Pay off all debt (except the house) using the debt snowball.
Step 3: Save three to six months of expenses in a fully funded emergency fund.
Step 4: Invest 15% of your household income in retirement.
Step 5: Save for your children’s college fund.
Step 6: Pay off your home early.
Step 7: Build wealth and give.
He advises putting this 15% in 401(K)s and Roth IRAs due to their tax advantages.
Within these accounts, individuals can invest in stocks, bonds, mutual funds and more.
However, Dave is always there to help a caller who feels they have left it too late to save for retirement.
See what he told a 50-year-old who “didn’t know where to begin.”
And find out how he helped a 64-year-old with “virtually nothing” get on the right track.