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Ask Dave

No retirement cash at 58

Dan is 58, and he has nothing set aside for retirement. He and his wife also have almost $40,000 in debt. Dan asks Dave if they should skip paying off debt, and go straight to saving and investing for retirement. Dave explains why that's not the best idea.

QUESTION: Dan is 58, and he has nothing set aside for retirement. He and his wife have almost $40,000 in debt, and they are trying to pay it off, but Dan wonders if they should skip to Baby Step 4 and start saving for retirement. Dave explains why this this would be a bad idea, and he urges Dan to get busy so they can retire with some dignity.

ANSWER: Your most powerful wealth-building tool, both mathematically and factually, is your income. The most powerful way to build wealth — whether it’s playing catch-up at 58, or starting at 28 and becoming wealthy over the long haul — is to have your income available. That means it’s not flying out the door every month to make debt payments.

Fifty-eight is not old, but you do have to get busy if you want to retire with some dignity. I’d really lean into this debt and make it disappear in the next 18 months. I’m talking about sticking to a tight budget, living on rice and beans, and selling so much stuff around the house those kids think they’re next.

After that, you’ll have to throw every dime you can into building an emergency fund of three to six months of expenses. And after that, you’ll have to spend about 10 years pouring $12,000 a year into good mutual funds for retirement. Can you do that and retire with some dignity? Yes, you can. But it’s not doable if you’ve got $37,000 in debt hanging around your neck.