A retirement roadmap helps a math teacher tackle debt without derailing his future

(CNN) — In an earlier update on math teacher and tennis coach Jeff Kizer, we described him as relaxed about money and said he did not view it as a path to happiness.

Still, being laid-back did not mean he had no concerns about his financial future.

A financial plan prepared by certified financial planner Craig Toberman showed Jeff, 57, that he could still retire comfortably at the age he wants, 75, even though he currently has less than $200,000 saved, a significant amount of debt and a 14-year-old daughter who is expected to head to college in a few years.

Jeff said he was surprised and relieved that his finances could work out if he stayed disciplined, kept paying down debt and continued working steadily for the next 18 years.

“I was ecstatic about where I am going to end up,” he said.

Priority shift: save less for now and attack debt

Craig’s main recommendation is that Jeff temporarily save less for retirement and redirect more money toward paying off two of his three loans over the next several years.

Jeff has nearly $165,000 set aside for retirement, including a $10,000 IRA. He has also been contributing 17% of his $73,000 teaching salary and 10% of his $40,000 tennis income, along with employer matches.

Craig advised Jeff to reduce his school contribution rate from 17% to 10%. That would still allow him to receive the full employer match. Combined with what he puts into the 401(k) from his tennis job, he would still be saving more than 14% of his combined $113,000 pre-tax income for retirement.

Craig estimates that trimming Jeff’s school contributions by 7% would free up about $4,200 a year after tax, or roughly $350 a month.

He wants Jeff to add that $350 to his current monthly payment on a $33,000 personal loan with a 10.23% interest rate. That would bring the total monthly payment to $1,216 and allow the loan to be paid off in two years instead of three, Craig said.

After that loan is gone, Craig recommends redirecting the $1,216 to Jeff’s roughly $50,000 student loan, which carries a 5.36% interest rate. That would raise the monthly payment on that debt to $1,401.

If he follows that plan, the student loan should be paid off by the time Jeff’s daughter is ready for college in 2031, Craig said. At that point, Jeff could use the $1,401 each month to help cover her education costs.

By the time she is a sophomore in 2032, Craig noted, Jeff could have even more money available for college expenses: his $75,000 truck loan, with a monthly payment of $1,092, would be finished. That would leave him with $2,493 a month — the two payments combined — to put toward tuition.

Side note: Craig said Jeff promised to keep driving the truck for years and added that if his finances ever start to unravel, he should sell it along with cutting other expenses.

Hold off on Social Security

Another important recommendation is for Jeff to wait until 70 to claim Social Security, when his projected benefit would be $48,624 a year. “He should bank that money while he continues to work until 75,” Craig suggested.

If he does that and keeps contributing to his 401(k)s until age 75, Jeff could have more than $1 million in his mid-70s, which Craig said should be enough, along with Social Security, for a likely stress-free retirement.

That projection assumes average annual returns of 6.34% in his portfolio through retirement and 5.48% after that.

For that outcome to happen, Jeff will need to keep working, live within his means and avoid dipping into his retirement savings before he stops working.

Craig’s advice: “Stay healthy, stay happy and take care of yourself. Like your job. Don’t blow it. Don’t tell off your bosses.”

If Jeff follows through, Craig said, “He has a sufficient probability of never having to worry about money.”