Help Me Retire: We want to retire in about 5 years but have $150,000 in credit card debt and loans and $1.4 million locked in retirement accounts — ‘we want to be really retired’

We have about $ 1.4 million in 401(k) and Roth accounts, $ 30,000 in stocks, a rental house that we owe $ 245,000 on and it grosses $ 1,700/month and pays for itself, a short-term rental that we owe $ 158,000 on and grosses about $ 48,000/year (nets between $ 10,000 and $ 15,000 depending on expenses). We own our own home with no mortgage, and no car payments.

We currently have two kids in college and we are paying for their tuition.

The albatross around our necks are $ 150,000 in credit card and unsecured loan debts. The world got expensive and our expenses got out of control. We have most of them at low-interest rates, but it is still an overwhelming amount that we are trying to chip away at and are paying $ 2,000-$ 3,000/month on them. We make between $ 225,000-$ 250,0000/year combined, and the range depends on my commissions at work.

Our plan is to use any bonus from work and profits from the short-term rental to pay down debt.  That could be around $ 20,000/year. Also using Mint to budget and set goals on paying off everything by using the snowball approach.

Any vacations we take, we save the money in cash and then pay the expenses immediately with that cash.

I’m worried about having enough when retirement age comes (we’re 52 and 51 now). My wife says I am putting too much stress on myself about the money, but when we stop working, we do not plan on working part-time jobs. We want to be really retired.

See: I’ll be 60, have $ 95,000 in cash and no debts — I think I can retire, but financial seminars ‘say otherwise’

Dear reader, 

Life is bound to throw you off course sometimes, and as you are well aware, those detours can get quite expensive. 

The fact that you have so much saved for retirement and that you have additional sources of income too is wonderful. The debt, as you are also well aware, is a problem. 

Retiring with debt is not inherently a bad thing — that is, depending on what type of debt you bring with you into retirement. For example, a reasonable mortgage usually isn’t a problem if the retirees-to-be can stomach it and have a payment plan in place, but credit card debt should often be avoided as much as possible. Given how much you and your spouse earn every year, regardless of bonus or short-term rental profits, your main focus should be on eliminating that debt completely before you retire. 

Don’t miss: Should you get out of debt before you retire? Here’s what you need to know

First look at what your current expenses are, and see if you can find even more extra cash to spare. If you don’t, why not? If it’s not because of necessity, review your spending, and see if there’s anything you can cut. 

As unpleasant as this suggestion may be (and I’m sorry in advance), you might also want to hold out on your next vacation… or take a less expensive one for the time being. Saving money in cash for your vacations and then paying them off immediately is a fantastic strategy, but if you were to pare down on those costs once or twice, you could throw that money toward your debt and see the balance drop quicker. 

That’s not to say you should deprive yourself of all of your joys, or that you shouldn’t take a vacation for the next 5 to 7 years until you retire, but maybe you can find a trip to take closer to home, or do a staycation. Maybe there’s a neighboring town you’ve never explored before, and you can do a day trip there. Or treat yourself to a few dinners out, walks along the beach or on a hiking trail, and so on. 

If you’re diligent with paying your debt, you may want to move some of it to a zero-interest credit card. There are a few you could find with long promotional periods, such as 18 or so months. There’s a caveat to this plan though — you need to be able to pay it off in the timeframe they offer the zero interest, or you’ll be paying handsomely in interest. Consider calculating how much you know you can definitely pay per month, and multiplying that by the number of months you’ve got the zero interest promotion. Then shift that much of your debt to the zero-interest credit card and be sure to pay it every month. 

Here are a few more suggestions from the Federal Trade Commission on how to get out of debt, on your own or with the help of credit counseling. 

Mint is a great tool, and budgeting is even better. Kudos to you and your spouse for staying on top of your finances and being focused on paying your debt off. 

Those rentals are a great source of income, but when you’re doing the math for how much you’ll need in retirement, be sure to stock up your savings accounts for emergencies for all of your properties. You never know, but you don’t want to be in a situation where you need to repair two or three roofs instead of just one for your primary residence. Also keep in mind there might be moments of vacancies or problematic tenants. Budget for that.

Check out MarketWatch’s column “Retirement Hacks” for actionable pieces of advice for your own retirement savings journey 

There’s no magic number for how much you need to save for retirement, but now that you’re within a decade of retiring, you can see a clearer picture of what your retirement might look like (and cost). Get all those figures in order and come up with a few back-up financial plans so your retirement doesn’t get derailed by the unexpected. Use a few rates of return and inflation so you get an idea of how they’ll affect your spending, savings and taxes in retirement. Think about how much you intend to withdraw from these accounts, and how that percentage will affect your balance at the end of the year (especially in moments of market volatility or downturns). 

Just to be sure: The amount you already have saved is great — not everyone has that much when they get to retire, or even half of that — so don’t forget about how far you’ve already come. 

I might be biased as a retirement reporter, but I don’t think you’re wrong for being worried about your retirement finances. Of course, you shouldn’t be stressed to the point where you can’t eat or sleep, but if you’re just trying to crunch the numbers and make sure you and your family are comfortable in your old age, there’s no harm in that. That’s especially true if you intend to stop working completely with no potential part-time or side money to earn in retirement. And if you still have debt, that will weigh on you — financially and emotionally. 

Readers: Do you have suggestions for this reader? Add them in the comments below.

Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com

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