Dave Ramsey shares his tips for struggling retirees in a money ‘death spiral’


On a a video posted on The Ramsey Show – Highlights YouTube channel in 2018, the American personal finance personality offered suggestions to Tina about how her parents can manage their situation. Tina had recently found out that her parents, aged 75 and 66 were “broke”, and in “tremendous debt”.

Tina’s parents are both retired, and they were living off their social security payment which came in monthly.

They also have an annuity which provides monthly income.

Combining the two, the couple have around £2,767 (around $3,763) coming in each month.

The annuity is worth around 47,453 ($64,505) and they still have a mortgage on their home.

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They owe £147,129 (around $200,000) on their home which is worth around £220,600 (around $300,000).

Tina’s parents also have £32,000 (around $44,000) in credit card debts.

Dave explained that by the time the pair have paid their house payments from their monthly income they have nothing left. This is why they are in credit card debt as they use this money to live.

He said: “They’re in a death spiral, a mathematic death spiral.

“Their house is gone; they can’t afford it.

“So, you’re selling the house, and there’s a chance you could find them a little condo for £73,500 (around $100,000).”

Tina suggested that her parents could get another mortgage for a slightly bigger place, however the money guru disagreed.

He continued: “They don’t make any money, they’re on a £2,000 (around $3,000) a month income, and they are in credit card debt. They can’t afford a mortgage.

“I would take their equity and buy them something that can be paid cash for it but otherwise I’m going to pay off their credit card debt and let them rent because I don’t want them back in a mortgage again.”

He suggested that they consider cashing out their annuity.

There may be tax implications attached so he told Tina to speak to a financial advisor.

If it is possible, he explained using that sum to pay off their credit card debts.

He would rather her parents in a paid for house with no money, and no debt.

He said: “I would liquidate that annuity, I would liquidate the house, pay off the credit card debt and I’d buy something for cash, and see if I can leave £7,000 (around $10,000) in an emergency fund and they’re 100 percent broke with a paid for condo and a small income.

“They can make it out on that.

“They were asleep at the wheel, financially. The credit card debt is not because they were irresponsible, it’s because they had a burn rate above their income, and they’ve been covering the burn rate for existence.

“The sad story is, unless someone has money they can throw at this, there’s not going to be a wonderful financial happy ending to this.

“it’s going to be a struggle all the way through because of their ages and their incomes.”

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