Dec 27, 2024
Millions of middle-aged Americans are hurtling toward retirement without a nest egg. Don, 50, and Tana, 48, find themselves in this position because of decades of high debt and relatively low income.
On a recent episode of Money for Couples, podcast host Ramit Sethi was shocked to see the couple had barely any investments and a six-figure debt burden. According to Don, their combined debt load of $387,990 was accumulated because they spent “30 years of barely keeping our nose above water.”
Advertisement
“Don and I had both sort of just given up, just like we assumed we were going to work until we were dead,” Tana admits.
Thanks for subscribing!
Read the best of Moneywise in 5 minutes or less.
By signing up, you accept Moneywise Terms of Use, Subscription Agreement, and Privacy Policy.
Don and Tana are not alone. Many Americans are similarly struggling to weave a safety net for themselves and preparing to work until they die.
Working till death
Economic strains have already added several years to the typical American career. The average age of retirement has jumped from 60 in 1995 to 66 as of 2022, according to a Gallup poll. Meanwhile, 20% of adults over the age of 50 have no retirement savings, and 61% are worried they will not have enough money to support them in retirement, according to a recent study by AARP.
As a consequence, many older Americans are staying in the workforce longer than they anticipated. A study by Retirement Living found that 22% of American baby boomers aged 59 and older were considering delaying retirement altogether.
However, factors such as ageism and health care issues could make delayed retirement impractical for many seniors. This is why it’s crucial to create a nest egg as early and as thoroughly as possible.
Fortunately, a recent career breakthrough has given Don and Tana a golden opportunity to salvage their retirement dreams. After Don moved from working at a non-profit to freelance consulting, their combined gross income jumped to $258,000.
“I make more a month now than I made in entire years,” he boasts.
Advertisement
This surge in household income can reshape their financial future. But to do so, Sethi believes they need to do away with decades of bad money habits and a scarcity mindset.
Must Read
- The ultra-rich use these 5 real estate strategies to build wealth while they sleep — you can start with just $100
- Here’s the average income of Americans by age in 2026. Are you keeping up or falling behind?
- Insurance companies profit most from drivers who auto-renew without shopping around. Comparing 100+ quotes takes 2 minutes and costs nothing
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Breaking the scarcity mindset
For Don and Tana, a high income is a relatively recent phenomenon, while their bad money habits are decades old.
“We’re not used to this. This isn’t our world, we don’t know what to do,” Tana admits.
Research by Sendhil Mullainathan, a Harvard economics professor, and Eldar Shafir, a Princeton psychology professor, found that a scarcity mindset often arises when individuals become fixated on a lack of a particular resource — like money — so intensely that it leaves little mental capacity for other priorities.
Advertisement
For much of their life, Don and Tana have prioritized keeping their head above water and staying financially afloat. However, with their recent surge in household income, Sethi recommends turning their attention to spending and saving instead. He prescribes a temporary cut to their discretionary spending so that they can pay off debt sooner while cultivating the skills to manage money like a high-income household.
“You want to go up very gradually and build the skill of what it's like to spend. [This is the] same thing I would tell athletes or lottery winners,” the podcast host said.
Most Americans seem to agree with this approach. Sixty-five percent of those surveyed by Empower said they would put a sudden windfall of cash towards savings or investments, while 52% said they would use the cash to pay down debt. Twenty percent would also seek the assistance of a professional financial advisor, which seems like a good move for Don and Tana as well.
You May Also Like
- JP Morgan sees gold hitting $6,000/oz before 2027 — and a Gold IRA lets you hold the physical metal while deferring the tax bill. Get your free guide from Priority Gold
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how
- Millionaires under 43 are reshaping investing — just 25% of their portfolios are in stocks. Here’s where their money is going
Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
