‘I'm embarrassed to ask this question': This 50-year-old Illinois widow says she put her kids through college — but now has nothing saved for retirement. Here's what Dave Ramsey told her

Jodi also said she used the insurance money she received after her husband’s death to pay off the mortgage and put her kids through college. Now she owns her house free and clear but she has only $1,000 in emergency funds, and earns just $36,000 after taxes as a social worker.

Her situation is familiar to many. About half of Americans between the ages of 55 and 66 have no personal retirement savings, according to the U.S. Census Bureau.

“I’m scared,” Jodi admitted. “It’s to a point that sometimes I cry.”

Ramsey, however, was much more optimistic about her future. “There’s nothing to be embarrassed about any of that!” he told her. Jodi’s lack of debt and fully paid-off house impressed him, and he gave her a three-step plan to get her finances back on track.

Step 1 - Invest $1,000 a month

Jodi’s lack of debt allows her to put a large proportion of her income toward savings. Ramsey recommends she set aside $1,000 a month to save for retirement, starting right away. That implies a savings rate of 33% on after-tax income.

A double-digit savings rate is nearly impossible for most Americans. The U.S. personal savings rate was just 3.4% in September 2023, according to the Bureau of Economic Analysis. But Jodi has the advantage of being an empty nester with no consumer debt and no mortgage. Saving a third of her income is feasible.

More: 8 best ways to invest $1,000

Step 2 - Deploy funds in a Roth IRA

Ramsey recommended a Roth IRA for Jodi’s monthly savings. This popular individual retirement account enables tax-free growth. Account holders who have held funds in this vehicle for more than five years can start withdrawing cash tax-free at 59 and a half years old.