Can we retire at age 60?

sam_maria_hill.top.jpgSam and Maria Hill of Cincinnati, Ohio, want to know how to balance their debt against their dreams. By Kate Ashford, contributor


(MONEY Magazine) -- Maria and Sam Hill, ages 29 and 32, have been married only a year and a half, but they're already thinking well into the future.

The couple, who now rent a two-bedroom apartment, dream of owning a four-bedroom house and filling it with two little Hills.

In the longer term, Maria, a recruiter, would like to follow her father's path and retire at 51. Sam, a city planner, hopes to quit at 60.

Goals
  • 1. Get out of debt
  • 2. Buy a house
  • 3. Retire early

Standing in their way: a shortage of cash. While he's contributing 10% of his pay to a 401(k) and she's putting $500 a month into a savings account earmarked for retirement, they aren't stashing nearly enough to leave work as early as they'd like, says Cincinnati financial planner John Ritter.

Also, hampered by $30,000 in credit card and student loan debt, they haven't started saving for a house.

Assets & Liabilities
  • $13,000 in retirement plans
  • $5,000 in cash
  • $20,800 on credit cards
  • $9,500 in student loans

"We want to get out from under that cloud," says Sam. Fortunately, the Hills make a solid income -- $117,500 -- that should allow them to erase the debt quickly, says Ritter. Then they can focus on the house and early retirement.

The solution

1. Get out of the red. The Hills think they can cut costs by $300 a month -- maybe by eating out less or moving to a cheaper apartment. If they put that toward the debt, on top of the $1,400 they're now paying. they can clear it in 21 months, assuming they pay the credit cards first. The student loan rates are low, but still higher than what they'd earn on cash.

2. Save for a down payment. Once debt-free, they can redirect $1,700 a month to their house fund. "At minimum, they'll need 10% down," Ritter says; that's $15,000 based on prices for four-bedrooms in the area.

3. Bulk up on retirement. To stop working when Maria is 51, they'd need to bank more than half their income. (Her dad had a pension.) But they could retire when she's 60 if, after completing the steps above, they save 19% and she uses her 401(k). To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed4.31%4.32%
15 yr fixed3.74%3.65%
5/1 ARM4.16%4.02%
30 yr refi4.29%4.29%
15 yr refi3.71%3.62%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 24,964.75 -254.63 -1.01%
Nasdaq 7,234.31 -5.16 -0.07%
S&P 500 2,716.26 0.00 0.00%
Treasuries 2.89 0.02 0.56%
Data as of 8:52pm ET
Company Price Change % Change
General Electric Co 14.74 -0.31 -2.06%
Bank of America Corp... 31.93 -0.04 -0.13%
Walmart Inc 94.11 -10.67 -10.18%
Advanced Micro Devic... 12.02 0.20 1.69%
Micron Technology In... 44.90 0.69 1.56%
Data as of 4:15pm ET

Sections

If Congress fails to reach an immigration deal, some communities could lose Dreamers who are firefighters, nurses, emergency care workers and teachers. More

Cybersecurity experts at FireEye expect "very aggressive" activity soon by a North Korean group of hackers who have been spying on South Korea's biggest multinationals. More

Since your kids never see cash, here's how help them -- and you -- be savvy with money they can't hold. More