Mike from Florida recently was put in a tough situation by his dad. He called into The Ramsey Show for some advice on how to move forward.
He revealed that his retired dad recently called up to ask for a loan of around $1,000 per month from Mike to cover some outstanding debt payments. The kicker is that his 65-year-old dad has been retired since age 49.
“I’m sorry he did that to you,” said Dr. John Delony, a host on The Ramsey Show.
Delony continued, “Dads aren’t supposed to do that to their boys.”
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Retired dad racked up debt and now wants his sons to bail him out
According to Mike, his dad has around $85,000 in personal loans and $5,000 in credit card debt. In total, these come with minimum payments of around $2,500.
However, he receives only around $4,000 per month from a retirement pension. In addition to his monthly income, he receives an annual bonus of around $7,000 to $12,000 at the end of each year.
But, understandably, the debts are making it challenging to live out his retirement dreams.
After a health scare, Mike’s dad shared his account passwords and asked his sons to cover his debts with whatever he had available.
More recently, he’s asked his sons to help him out financially. Ideally, he wants them to provide $1,000 per month to help cover the debt payments.
Supposedly, he plans to repay them at the end of the year, after receiving his annual bonus.
After learning that the dad retired at age 49 and is currently 65, Ramsey hosts pushed back against the idea of Mike handing over cash to his father.
“I would say you need to go back to work,” said Jade Warshaw.
Recently, Mike visited the family home and suggested that his father sell off some of his assets, specifically a paid-off farm.
Unfortunately, his father didn’t take that suggestion well. “He said that was his dream when he retired to be able to have that land,” said Mike.
“But was his dream also to go hit up his sons for money?” responded Delony.
Ultimately, the Ramsey hosts suggested Mike skip loaning his dad any money. Instead, they believe the dad should head back to work to fund his own dreams.
“My thing is like he can work. He’s not 85, he’s 65,” said Warshaw, “He for sure has six good working years in him.”
Warshaw suggested telling his dad, “This is not my burden to carry.”
Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
The dangers of retiring too early
Retiring early is a dream for many. But retiring too early comes with significant financial dangers, specifically around the possibility of outliving your savings.
When you choose to retire around age 50, instead of a more traditional retirement age, your nest egg needs to last significantly longer. After all, you have a longer timeline for covering your costs. But you’ll have a shorter timeline to build the nest egg you need.
If you leave work early, you’ll miss out on years of retirement contributions from you and your employer. Additionally, your portfolio won’t have as much time to grow in the lead-up to your retirement years.
Beyond your own nest egg, if you choose to take Social Security benefits early, you’ll face a smaller monthly check. For retirees with a pension option, retiring early often cuts down on your annual income.
Healthcare costs are another overlooked factor for early retirees. Without an employer-sponsored health insurance plan, you’ll need to pay for your own until you’re eligible for Medicare at age 65. Many early retirees are shocked to discover their new healthcare costs are significantly higher, which can throw a wrench into their retirement plans.
While retiring early seems to receive a lot of attention in the press, it’s not a common choice to retire before age 60. In fact, just 18% of Americans retire before age 60, according to the LIMRA Secure Retirement Institute. And 13% of retirees are leaving the workforce between the ages of 55 and 60. Only around 2% of retirees opt out of work before age 55.
Early retirement isn’t too common. And likely for good reason, few Americans have enough savings to comfortably retire early. On average, households aged 55 to 64 have $537,560 in retirement savings. But the median household retirement savings for the same age group is $200,000.
Although the actual amount required for a retirement varies, estimates suggest that retirees need to leave the workforce with around $1.2 to $1.5 million for a comfortable retirement. The gap between actual savings and suggested savings puts many retirees at risk of running out of money, even when leaving the workforce at a traditional retirement age.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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