‘Do I have to work until we die?’: This couple, 50 and 48, has $350,000 in debt with zero retirement savings — and their income has just changed drastically. Here’s Ramit Sethi’s answer

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.

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.

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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.

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.