Math teacher gets a plan to keep his debt from derailing his retirement

By Jeanne Sahadi, CNN

(CNN) — 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 expressed surprise and relief that things could work out for him financially so long as he stayed disciplined and methodical about paying down his debts and working consistently over the next 18 years.

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

Top priority now? Ease up on savings to clear debts

Craig’s biggest recommendation is for Jeff to actually save less for retirement and instead redirect money to pay off two of his three loans in the next few years.

At this writing, Jeff had nearly $165,000 saved for retirement, including a $10,000 IRA. And he had been socking away 17% of his $73,000 teacher’s salary and 10% of his $40,000 tennis salary plus employer matches.

Craig recommends Jeff lower his 17% contribution rate to 10% at his school. That’s still enough to get his employer’s full matching contribution. And combined with the money he is contributing to the 401(k) at his tennis job, he will still be saving more than 14% of his combined $113,000 pre-tax income for retirement.

Craig calculates that a 7% drop in Jeff’s contributions at school will free up $4,200 a year after tax – or $350 per month.

Craig wants Jeff to add that $350 to his current monthly payments on his $33,000 personal loan that has a 10.23% interest rate. That way, he’ll be paying a total of $1,216 each month. And in doing so, the loan will be paid off in two years instead of three, Craig said.

When it is, he then suggests Jeff redirect the $1,216 to pay down his roughly $50,000 student loan that has a 5.36% interest rate. That will boost his total monthly payment on that loan to $1,401.

If he does that, the student loan should be paid off by the time Jeff’s daughter is ready to go to college in 2031, Craig said. At that point, he can repurpose the $1,401 a month to help pay her college costs.

And by the time she’s a sophomore in 2032, Craig noted, Jeff will have yet more money to put toward college: His $75,000 truck loan, on which he’s paying $1,092 a month, will be paid off. That will then give him $2,493 a month ($1,401 + $1,092) to further help with his daughter’s tuition.

(Side note: Craig said Jeff promised he will drive that truck for many years and noted if anything goes awry with Jeff’s finances, he should sell it in addition to cutting back on other spending.)

Wait on Social Security

Another key suggestion for Jeff is to wait until 70 to claim Social Security, at which point his expected benefit will be $48,624 a year. “He should bank that money while he continues to work until 75,” Craig suggested.

If he does that and continues contributing to his 401(k)s until age 75, Jeff could have over $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 his retirement year and then 5.48% thereafter.

For all that to happen, though, Jeff needs to keep working, live within his means and not tap his nest egg before he retires.

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 does all these things, 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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