A Texas man, 53, with zero retirement savings is ready to sell his home to reset his finances, but Ramsey Show hosts say he has better ways to rebuild

Chris called into The Ramsey Show to ask hosts George Kamel and Ken Coleman for advice (2). 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 $370,000 on a home worth $600,000. He also has a $73,000 pool loan and a car worth $42,000. His household income is $128,000 a year, not counting his side hustle.

Selling the house could leave Chris with about $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 $11,000. He would be debt-free aside from a new mortgage.

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 $42,000, he could sell it, walk away with $15,000, and save $6,000 a year by cutting $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 $1,600 per month. If he kept working until 70, he might end up with a nest egg of $750,000 (3).

In 2022, the last year with available data, the median retirement savings balance for 70-year-olds was $200,000, according to the Federal Reserve. So that plan could put Chris in a comfortable spot and let him keep his home.

How much retirement savings do you need?

There's no single benchmark for a retirement savings goal. Citizens Bank suggests aiming for 10 to 12 times your ending salary (4). Fidelity suggests saving 10 times your salary by age 67, which is Social Security’s full retirement age for people born in 1960 or later (5).

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

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 Social Security 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 $80,000 a year and expect to need 80%, or $64,000 a year, in retirement. Say Social Security will pay $24,000 a year, which is close to today’s average benefit. You’d need $40,000 a year from savings.

If you have a $1 million nest egg and withdraw 4% a year, that gives you the $40,000 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, but the right approach 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.