Math teacher gets a roadmap to keep debt from upending retirement

EDITOR’S NOTE: Jeff Kizer is among a handful of participants selected to work one-on-one with a financial expert for CNN’s Savings Challenge. This story was originally featured in the Savings Challenge newsletter, which you can sign up for here.

In CNN’s first update on math teacher and tennis coach Jeff Kizer, we described him as “chill” when it came to money and noted he didn’t see it as a source for happiness.

But being chill didn’t mean Jeff hasn’t been worried about his financial prospects.

A financial plan by certified financial planner Craig Toberman showed Jeff, 57, that he could retire comfortably at his desired age of 75 despite having less than $200,000 in his nest egg today, a heavy debt load and a 14-year-old daughter likely to go to college in a few years.

Jeff said he was surprised and relieved that his finances could still work out if he stayed disciplined and methodical about paying down debt and working consistently over the next 18 years.

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

Top priority now: slow retirement saving and attack debt

Craig’s main recommendation is for Jeff to save less for retirement for now and reroute that money toward paying off two of his three loans over the next few years.

At the time of the plan, Jeff had nearly $165,000 saved for retirement, including a $10,000 IRA. He had been setting aside 17% of his $73,000 teacher salary and 10% of his $40,000 tennis salary, plus employer matches.

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

Craig calculates that the 7% reduction in Jeff’s school contributions would free up $4,200 a year after tax, or $350 a month.

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

After that loan is gone, Craig suggests Jeff redirect the $1,216 to his roughly $50,000 student loan, which has a 5.36% interest rate. That would raise the monthly payment on that debt to $1,401.

If he follows that path, the student loan should be paid off by the time Jeff’s daughter is ready to start college in 2031, Craig said. At that point, the $1,401 a month could be redirected to her college expenses.

By the time she is a sophomore in 2032, Craig noted, Jeff would have even more money available for college costs: His $75,000 truck loan, on which he pays $1,092 a month, would also be paid off. That would leave him with $2,493 a month, combining the $1,401 and $1,092, to help with tuition.

Side note: Craig said Jeff promised to keep driving that truck for many years, and noted that if anything goes wrong with Jeff’s finances, he should sell it in addition to trimming other spending.

Delay Social Security

Another major suggestion for Jeff is to wait until 70 to claim Social Security, which would raise his expected benefit to $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 should be sufficient with Social Security to have a most likely stress-free retirement,” Craig said.

That assumes an average annual return of 6.34% in his portfolio until retirement and 5.48% after that.

For that to happen, Jeff will need to keep working, live within his means and avoid dipping into his nest egg before retirement.

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 those steps, Craig said, “He has a sufficient probability of never having to worry about money.”

What’s next: We’ll follow up again with Jeff in a few weeks. But next week we’ll catch up with Abbey Graf, who will learn whether she has a solid chance at early retirement.

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