What Should We Do After We Drained Our Retirement Savings?


Dear Steve,

My husband hasn’t had an income since 2012. We have 450k left on the mortgage, owe around 75k on credit cards, two car payments, installment loan with IRS for 40k, Paying 1k interest monthly on 250k HELOC since 2006. He emptied his 401k-no retirement left. I work for US govt, earn 112k, took 50k from my TSP & paying that back. He’s trying to start a consulting business-but then came Covid19. I’m 70, he’s 76.

What’s the best option for this mess? We have $ to last maybe 3 months. We need around 25k a month to stay afloat.



Dear Stephanie,

Oh crap. This is not a good situation. But the reality is it hasn’t been good for many years.

I previously wrote a piece you should absolutely read — How to Get Out of Debt. The Honest and Unvarnished Truth.

The mechanical process of dealing with debt is fairly straightforward.

The hard part is allowing emotions to obscure your better judgment. I’m not blaming you. Just trying to explain what happens for the next person who reads this.

The minute the 401(k) was tapped that’s when the problem began. Hope and prayer lead many to make poor choices. I’ve fallen for that as well at times in my life. Nobody is immune.

The credit card debt and your taking money out of your TSP are clear indications you’ve been living a lifestyle you can’t afford for some time.

The ship is sinking so now is the time for dramatic and drastic action.

Frankly, the way to get out of a debt hole is to stop digging it deeper. There is nothing that indicates that today your income is sufficient to meet your obligations and begin to increase savings again.

Logically the fastest way to stop this hemorrhaging is going to be to terminate all the financial obligations you can. This will mean getting rid of all the obligations you can, terminating debt with consumer bankruptcy, and then regrouping within your income.

Your age is a high-risk factor since we don’t know how long you will continue to be able to earn an income. And the idea that your 76-year-old husband should be investing anything in starting a new business at this time is not reasonable.

You also need to think about selling the house and looking for an apartment to rent or someplace where you will not have unexpected homeowner expenses. Turn the cars back in and try to live on one car or get a beater to drive till you regroup.

There is no gentle advice I can give you based on the facts you shared. You have no days left to deal with this. You are close to being out of income, savings, retirement, or the ability to safely care for yourself.

The house is on fire!

In the strongest terms possible I would advise you to find a good local bankruptcy attorney and have a free discussion about what bankruptcy would mean for you. Bankruptcy is the fastest way to get a fresh start for the least amount of money.

Please let me know what you decide to do by updating me in the comments below.




Big Hug!

Get Out of Debt Guy –

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