Fixing One Family's Finances - Managing Money, Savings, Debt

Fixing One Family' s Finances

One couple' s cash crunch and a solution for getting back on the savings track

Courtesy of Terry and Randy Drummond Unplanned medical bills caused the Drummonds to overspend, build debt and tap into savings; now the couple needs to save more for future health care costs. Meet Terry and Randy Drummond of Hebron, Indiana, the first family selected by as part of its new column examining the financial challenges many 50-plus Americans face. Rick Mayes, a fee-only financial planner in Carlsbad, California, helps them boost their savings.

The People

Terry, 63, is a retired public school teacher. Randy, 63, is a retired industrial engineer.

Related

Their Finances

Taxable Income: $79,000; Total Debt: $138,000; Net Worth: $450,000 In 2012 the Drummonds collected $67,982 from Social Security, their two pension plans and mutual fund dividends. They also withdrew nearly $11,000 from Randy's IRA, which resulted in a . Their debts consist of a $96,000 mortgage, $31,000 on credit cards, $1,164 on a car loan and $9,470 in education loans. Their respectable nest egg includes two IRAs, a variable annuity, mutual funds and $30,000 in home equity.

The Problem

Unplanned medical bills caused the Drummonds to overspend. (Last year, they spent $93,372, which added to their credit card bills.) Among the circumstances that forced the couple to build debt and tap into their savings: High premiums: The Drummonds receive their health insurance through Terry's former employer, but spouses pay their own premiums. Last year Randy's rose to $16,238.

Poor health: Randy had and can't find lower-cost health insurance. Terry had colon cancer and faced $5,580 in unreimbursed bills.

A special splurge: To celebrate the end of Terry's chemotherapy, the couple spent $6,000 on a family trip to Hawaii with two of their three grown children.

The Plan

The Drummonds need to save more for their future health care costs. , and Medicare, should eventually lower the Drummonds' insurance costs. But they need to plan for . Fidelity puts an average retired couple's health care costs at $240,000. Leave the IRAs Alone: . They can also result in a higher bracket for taxes on Social Security. Find Ways to Lower Bills and to Live Within Their Means: Suggestions include trimming the , which are costing $5,000 a year. Opt for low-cost vacations, entertainment and restaurants. Invest in Low-fee Mutual Funds: Financial planner Mayes suggests a with the goal of reinvesting investment dividends to increase the nest egg.

Want to Submit Your Story

If you'd like to be a candidate for Mend Your Money, sign up at .

Also of Interest

Visit the for great deals and savings tips Cancel You are leaving AARP.org and going to the website of our trusted provider. The provider’s terms, conditions and policies apply. Please return to AARP.org to learn more about other benefits. Your email address is now confirmed. You'll start receiving the latest news, benefits, events, and programs related to AARP's mission to empower people to choose how they live as they age. You can also by updating your account at anytime. You will be asked to register or log in. Cancel Offer Details Disclosures

Close In the next 24 hours, you will receive an email to confirm your subscription to receive emails related to AARP volunteering. Once you confirm that subscription, you will regularly receive communications related to AARP volunteering. In the meantime, please feel free to search for ways to make a difference in your community at Javascript must be enabled to use this site. Please enable Javascript in your browser and try again.