A man with no retirement savings is ready to sell his home to reset his finances — Ramsey Show hosts say he has better ways to rebuild

Hitting your 50s with little to no retirement savings can feel like a gut punch, but one Texas man’s story shows that there may be a better option beyond the ropes.

Chris called into The Ramsey Show to ask hosts George Kamel and Ken Coleman for advice (1). Along with having no retirement savings, he said he has no emergency fund. He's thinking about selling his home to start fresh.

Chris owes US$370,000 on a home worth US$600,000. He also has a US$73,000 pool loan and a car loan worth US$42,000. His household income is US$128,000 a year, not counting his side hustle.

Selling the house could leave Chris with about US$180,000. But after paying off his car and pool loan and putting 20% down on a replacement home, he'd be left with only about US$11,000. He would be debt-free aside from a new mortgage.

However, Kamel and Coleman disagreed on whether selling the home was the right choice.

A cheaper fix may be hiding in plain sight

"Selling a house is always the last answer, not my first solution," Kamel said. "It doesn't actually change the behavior that got us here. It just feels like a get-out-of-jail-free card, and it kind of moves you backwards. Instead of building equity and getting that house paid off, now we're liquidating and starting from scratch again in our 50s."

But Coleman liked the idea of selling the house, starting fresh and renting for a few years.

"It's aggressive, but I like it. It's a reset for sure," he said.

Both hosts agreed that selling the home isn't Chris's only option. Since his car is worth US$42,000, he could sell it, walk away with US$15,000 and save US$6,000 a year by cutting US$500 a month in car payments.

In fact, Kamel and Coleman mapped out a solid timeline for Chris based on selling the car. According to their math, Chris could have an emergency fund by 54. From there, he could start investing 15% of his income for retirement, or about US$1,600 per month. If he kept working until 70, he might end up with a nest egg of US$750,000.

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How much retirement savings do you need?

There's no single benchmark for a retirement savings goal. Spring Financial suggests aiming for 10 times your salary by age 67, which is a common goal for savers (2).

Retirees are often told they’ll need about 80% of their former income to live comfortably, though some of that can come from CPP and OAS.

The best approach is to think about when you want to retire and what your expenses might look like. If you plan to downsize and retire at 67, you’ll likely need less money than someone who wants to retire at 60 and maintain the same lifestyle.

If you’re nearing retirement age and aren’t sure whether you’ve saved enough, one rule of thumb is to calculate your annual income needs, subtract your expected CPP/OAS benefits and see how much your nest egg needs to generate each year. Then apply the 4% rule to your savings balance to see if the numbers line up.

Let’s say you earn C$80,000 a year and expect to need 80%, or C$64,000 a year, in retirement. Say CPP and OAS will pay a combined C$19,000 a year, which is close to today’s average benefit, you’d need C$45,000 a year from savings.

If you have a C$1.25 million nest egg and withdraw 4% a year, that gives you the C$45,000 you need. If you have less saved, your choices include working longer and saving more or trimming your spending in retirement. Or you could retire from your full-time job and work part-time to bring in extra income.

How to build retirement savings from scratch

Building a nest egg can feel daunting. A 2023 survey from the Healthcare of Ontario Pension Plan found that 49% of all Canadian women and 33% of all Canadian men have less than $5,000 in savings for retirement. The same survey also found that 40% of homeowners aged 55-64 intend to sell their home to fund their retirement (3).

However, the right approach to creating a sustaining a nest egg can get you surprisingly far.

Start with a budget. Track your spending and make sure you set aside money each month for retirement contributions.

A good rule of thumb is to save 15% of your income for retirement. If that’s too much at first, start smaller and raise your rate over time. You might increase your savings by 1% each year or put your annual raises toward retirement.

Next, invest your money wisely. If retirement is years away, it usually pays to put your savings into the stock market so your money can grow over time.

You can buy mutual funds or other index funds within your RRSP and TFSA accounts. If you have an RRSP through your employer, aim to take full advantage of their employer match. And if you’re 50 or older, make catch-up contributions to your RRSP if you can.

Finally, don’t hesitate to use the gig economy to boost your income.

A 2024 survey from H&R Block found that 32% of Canadians have a side hustle, though 25% don't have a clear understanding of the tax implications of this extra income (5). Your earnings will depend on the gig and how many hours you can put in. Since that money usually isn’t needed for regular bills, you can direct all of it toward retirement savings to help you get ahead or catch up.

— With files from Rebecca Holland

Article sources

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The Ramsey Show (1); Spring Financial (2); Healthcare of Ontario Pension Plan (3); H&R Block Canada (4)