From $287K in Debt to $10K/Month Retirement Income? | Full Case Study 2026

Let me share with you a case study here. So I have a person I'm working with, very nice lady, mom, married, income net take-home $6,000 per month. We have a real estate business, we have a long-term rental, one property makes $3,150 a month. So total income $9,150 on average. She could make more money, but she's actually contributing a lot to to her retirement accounts. Here is our cost of living expenses, that includes debt payments, $5,213.56. And on the property, real estate property, $2,477.25 is the, the mortgage, taxes, insurance, all the maintenance costs, whatnot. We have a mortgage at 2— or total debt is $213,000. We have a HELOC on this property at $25,000 credit limit where we owe $21,000, and we have $169,545.67 at 3.88%. Okay, so this is all our debt. $21,000. We have 3 business credit cards, 1 HELOC, second position, and then first lien mortgage. That's our debt. We have positive cash flow, positive cash flow on both sides, personal and business. That's good. And she has a simple goal. She's like, Denzel, I want to have $10,000 a month in income. I don't know if that's the right number or not. I feel like that's a great number for, for me, that at age 62— so we are currently 57, and our retirement age, which means she no longer has to work for the company she works for, and she will transition into the next phase of her life. She's not just going to sit on the couch and watch TV all day. Okay, so she's going to transition to the next phase of her life, which may involve some active income, may or may not. She does not want to have to rely on active income. So we have real estate income of $3,150. We have a Social Security benefit. All right, let's create some more space here. We got a Social Security benefit at 62 that she can take $2,498. So, so far at 62, we have $2,498 and $3,150. Let's say the rent stays the same, which is highly unlikely, right? Between 57 to 62, that's 5 years. I'm sure the rent would go up. Let's say it went up 1%, or say she increases the rent. Yeah, what is 1%? 31. Say she increases the rent by $50 once per year, every year for 5 years. 250. Let's say 62. Now she's collecting rent at $3,400. That's super conservative. Plus Social Security income, we're at $5,898. We are short in her eyes so far. We're short $4,102. We need to create income of an additional $4,102. There's only two ways to do it. Decrease expenses, obligations, right? Pay off debt or increase income. There's only two— there's the only two things you can do: decrease your expenses or increase your income. Pick one, pick both. What's gonna make the most sense for this woman, right? When we go case by case, we look at these different things, say, okay, she has a desire to be debt-free. She wants to pay off her debt. Let's look at that. We've got the $213 here in the 74. When I look at her total debt payments, total, total debt obligations, we have $1,873.69. On the biz, on the personal, $775. So if we became debt-free, she reduces that number even though the income's not $10,000, but it reduces her need for that much by $2,648. So $4,102 minus $2,648, $69. Now in that scenario, if we take the next 5 years getting out of debt using this cash flow and that cash flow, can it be done? 5 years, 60 months, let's do the math. 672.75 plus 786.44, so total cash flow personal and business $1,459.19 with total payments of $2,648. So $2,648.69 we're sending for in the event she goes and says, I'm just going to pay off all my debt so that I can retire faster. So what is how most Americans think, right? Not horrible. It might actually work for some people. Might not. This is where you do the math, figure it out. $4,107.88, and you have a 5-year window, right? We're trying to get to 62, so times that by 60 months. That's $246,000. So it was total cash flow plus monthly payments was $4,107. $88 times 60 months, $246,472.80. Okay, does that get her debt-free? $213,588.36 plus $74,171.95. No, her total debt is $287 So if she dedicates $246,000 to knock down $287,000, I'm still in debt, not— may not be able to retire by 62. So that right there, although it's the safe thing to do, pay off debt, or what seems to be safe, ends up being a tragedy because now she's gonna feel like I need to keep working because if I turn my Social Security on and let's say I get that real estate income still going, $5,898, you know, I didn't get out of debt. I was still short on my goal. Maybe I'm not experiencing retirement the way I wanted to. Okay. But the whole story is not done yet. Why? Well, she does have investment accounts. Right, so let's evaluate what, what those are. We have a 401k with what looks to be about $455,000 built up in there. We have an HSA, not a whole lot of money in there, but there's $3,423.67. We have a Roth IRA with $13,043.58. We have a whole life. She funded $45K so far. I want to say there's like maybe $35,000 in cash value, but we do have a loan in there. So we have a whole life insurance policy that she's funding, Roth IRA, HSA, 401, and we also have an E-Trade account, $55,000. She contributes 15% of her pay. Let's say she's contributing 10— let's go with $15,000 per year contributions, because I just went off her net, so her gross is actually much higher. So I'm gonna use the $15K number that she's contributing to her retirement. Let's So let's tally all this up and I'm just gonna do round numbers, make it easy. $455,000 plus $34,000, $13,000, $30,000 plus $55,000. So we have a little over half a million with contributions of $15,000 per year. So what is that? $15,000 divided by 12, $1,250. Cool. Let's look at our calculator. Let's say that we got that 5.56 number. We have a 5-year window. Let's do 6% gross, uh, net rate of return. Let's say 6%. By the way, when you're being shown rate of return, so if, so if I say rate of return of 6%, when you're talking to a professional, ask them, is that net or is that gross? Because in order to earn a net 6% growth, you have to earn a higher number than that. So just keep that in mind. For this conversation, we're going to assume a net 6% growth for the next 5 years, which means she has to earn more than 6%. So we're gonna net 6%, grow for 5 years. Initially $556, we'll work with contributing $1,250 on a monthly basis. My account will grow to $837. So $837, 6%, 5 years, I'm 62. Let's say we tried to pay off debt. We owe— so $287 $7,603.1 minus $2,464.72.80. So let's say we owe $41 left, and she's like, screw it, let's pay off the debt. So let's say she gets to 62, she's already past 59.5, so all these accounts are unlocked, accessible. No tax penalty. So let's reduce her $837,000 by $41,000. So now let's just say we're debt-free and I have $795,000 and I recovered that $2,648,690, right? Which means I reduced her living expense down. So let's figure that out. $5,213.56, that number right there, plus on the business side, $2,477.25. So $7,690 was expense minus $2,648 6, 9. We're at $5,041.12. Let's do 5 years cost of living increase of 4%. So 5 years, 4%. Uh, let's do— let's go with that original number of $7,690.81. Nice. This is just $7,690. So her number is actually pretty accurate if she kept her lifestyle the same without paying off any debt. Kept everything stays the same, but cost of living and grows up, goes up by 4% every year for the next 5 years. Her cost of living would have increased to about $93,000, $94,000. So wanting $10,000 income, very reasonable. There's $600 of free cash flow left over. Okay, but that's kind of tight. Because she's only a few more years before she needs more income than $10,000, right? So by taking that $9,389 and then minus the $2,648 of being debt-free, so $90— it's going to go $9,400 minus $2,648, we're at $6,700. Let's just call it $6,800. So let's increase that. So $6,800. Are we there? Like, almost. We're still short. We're short that amount to get to that full $10,000 a month. The full $10,000 a month. Add $10K, right? Boom. So altogether is $10K. We're short $1,453.31. We have $795 grand. Can we create that in an annuity, an immediate annuity at 62? Let's, let's ask Google. Let's go back. Is this helpful, guys? This is very helpful. Let me know in the comments. Is this like, oh wow, this is like, you know, plug and play. How much do I need at age $62,000 for an immediate income annuity to pay out— what's my gap? My gap was $1,453. Call it $1,500 to pay out $1,500 per month. So we need about $250,000 to $300,000. So We'll use the high one, $300,000. So we would need to take $300,000 or less to produce $1,500 a month in income. That lowers the investment accounts to $495,000. So there's only $495K left, and we let that continue to build. She takes income $1,500, and we're at that $10K number. So at 62, by paying off debt in combination with continuing to contribute 15% of her income, grew the account. By 62, we acquired an annuity, okay, and it immediately paid her. So that is One option. The other option is she could maybe not pay off all of her debt, maybe leave the $169,000. Maybe we leave that mortgage outstanding. Maybe we just pay off credit card debt, credit card debt, HELOC, PLOC. Say we do velocity on the HELOC, home equity line of credit, all the credit card debt, even the cash value loan that she has on her whole life. Because we have a loan there, $28,000. Get all that cash flow back. That may— that'll take less than 5 years. Maybe it only takes us 2 years or less, maybe 2 and a half years, to to remove all of this utilization debt, take that cash flow and contribute here to investments, grow this for the next couple years. Maybe we get to a higher number than what we have to beat, $795,000 basically, which isn't hard to do because we were gonna get there whether we paid off debt or not, right? It had no impact to our cash flow, no impact to debt elimination. We were already contributing 15% of her income. It grew to $795. So let's do the math. Let's say we paid off her— all her debt here except for mortgage debt. So we get $85, we get $82, we get $236. On that credit card, we get $520 and we get $255, right? So $1,178. Cool. Add that to the $1,250. So it's $2,428. We'll round down, we'll just say $2,400. Share my screen. Let's do that again. So we started with $556,000, 5-year window, 6% growth, uh, since 6% net growth. Now we're contributing $2,400 a month, so it grows to $917,408. Let's, let's see, did that make sense? How do you know if that makes sense? Well, you compare it to the amount of debt that would have been remaining had you not paid off the rest of the debt, right? So let's go back. So let's do— this is where it gets juicy because now we're really getting in the, in the weeds of it. But when you have a nerd like me that just loves doing this all day long, You know, you send me your numbers, we work together, we, we figure it out. So save you a bunch of time. What do I want to do? So I want to show the number. Option 2: some debt payoff, not all. If I invest instead, my account grows to $917,000. And it actually will be less because, you know, it does take time to get out of debt. We're just not just gonna pay it off all at once, so it will take time to pay off debt. So $917,000, let's go with that for now, with a net growth of 6%. I feel like that's fair. So that's an extra $122,000, and we go from $287,000 minus $21,000 minus $18,000 for minus credit cards minus the other credit cards minus that policy loan. By the way, when we pay this off, that's cash. That's, that's cash for her to reuse again. So $28,215. So we're left with $185,000 of debt. So we're still carrying $185,202.19 of debt, but we have $122,000 more of investment. What am I short? Because, because we're trying to solve for retiring still at 62 with $10,000 or more in income. Well, did I write the number? I'll do it again. So by paying off everything but the mortgage for the business, that is— I didn't put the payment. Let me go find the payment real quick. Payment's $1,476.9. Okay, so Total debt obligations was the $26,486.9 number minus $1,476.9. So we're short. We have $1,000 right here. So debt removed, $1,178. Our goal was to get to $10,000 in income. We have $5,898, so plus $7076, so $10,000. So call it $3,000. We need $3,000 a month in income now to replace remaining. If $300,000 only got me $1,500 at 62, well then do the— I mean, it'd probably be the same You probably need double. Let's see, how much does $600K at age 62 get me in income from an immediate annuity? $600,000, right? So we've got, um, $3,800— oh, I'm not sharing my screen. Boom. So you can see that $600,000 will get us— so more than half. So it's— the number's a little bit less. So we meet that number. We, we know it's, you know, way more than $300,000, probably more like, what, $500,000? Yeah. So it's closer to $500,000 to produce that $3,000 a month in income. So $500,000 I gotta pull from 917. There does come a time where you don't want to extract too much money from your investment to secure it. You don't want to take too much money. So here's a perfect example for this person. Becoming debt-free fully is looking quite attractive. It's just a matter of how we get there. And that's where we go into, okay, using lines of credit can help us get there. Absolutely, because we have mostly credit card debt. And what she's doing on both ends right now is we're doing personal line of credit to accelerate the line of credit itself. When that goes down, then we're going to push the credit card in there. Home equity line of credit, we're accelerating the home equity line of credit itself with that incoming cash flow, and then we're pushing the credit card debts as they expire, 23%, right, all that pushing in there. We're probably not going to accelerate this right away. We're going to get rid of these, get rid of these. Okay. Then there could be a hybrid of figuring out the best of both worlds where we use some annuity rollover at her current age. And then maybe again at 62, that could get us where we need to get to. Pay off debt. There could be a simple move where we get to 62 and we extract some money out of here, pay off some of this debt, that $185,000 that, that would have remained. Okay. So there might be something there. And mind you, this $185,000 is way overestimated because all I did was minus the principal balances, not including how much the mortgage went down just by making payments for 5 years. All right, so that number is going to be down, probably closer to this number, and that may get us to where we want to be at.