Jade Warshaw Warns Your Car Payment Could Be Delaying Your Retirement
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
On the Sept. 29, 2026 episode of The Ramsey Show, titled Building Wealth Requires the Courage to Make Unpopular Decisions, co-host Jade Warshaw talked about what it feels like to buy things before you can really afford them:
“When you buy things you can truly afford, they speak to you and tell you what a great person you are. But buy the car you couldn’t afford and every payment reminds you: I’m the thing keeping you from retiring when you want.”
If you’re within a few years of retirement, take that line literally. A car payment carries a hard cost to your retirement. Every dollar sent to a lender is a dollar that doesn’t go into your nest egg, and every payment you carry past your last paycheck increases the amount you need saved before you can quit.
Warshaw Is Right, and the Math Backs Her Up
Her point holds up, and the numbers make the case stronger than the feeling does. Say you have a $600 monthly payment. If you invested that money instead at an assumed 7% annual return (an example, not a promise), you’d have about $42,956 after five years. After ten years, it grows to roughly $103,851.
Keeping the payment after you retire costs you even more. Under the common 4% withdrawal guideline, funding $600 a month for life takes about $180,000 in savings. That’s the delay Warshaw is describing. To retire on schedule, you’d need an extra six figures saved to keep paying for the car.
She has watched it happen. She once advised a 72-year-old recent retiree who had financed a $30,000 car: “I don’t love you going into retirement with 272,000 and debt payments. It hurts my heart to know you’d be pulling from your IRA to pay off a car loan.”
Plenty of people are in that spot. Federal Reserve data show households ages 55 to 69 carried about $1.1 trillion in consumer credit in the second quarter. That’s roughly 22% of the national total. Car prices make it worse: the average cost of a new vehicle just hit a record high.
Your Interest Rate Decides How Fast to Kill the Loan
Whether you should pay off a car loan early depends mostly on its rate. Here’s an example: a $35,000 loan over 72 months.
| Loan rate | Monthly payment | Total interest |
|---|---|---|
| 9% | $631 | $10,424 |
| 3% | $532 | $3,288 |
At 9%, every extra dollar you put toward the loan earns a guaranteed 9% return. Your portfolio can’t promise that. Paying this one off fast is an easy call.
At 3%, investing would probably beat prepaying on paper, at least while you’re still working. That changes as retirement gets close. Once the paychecks stop, the number that matters is your fixed monthly costs, and a 3% payment reduces your withdrawals just as much as a 9% one. If you plan to retire within about three years, drop the payment either way. A low rate only tells you how much time you have.
What to Do Before Your Last Paycheck
- Figure out what your payment costs in retirement savings. Multiply your annual payments by 25. That’s roughly how much extra you’d need saved to keep making them under the 4% rule. Put that number next to your retirement target.
- Pay off anything with a rate above your expected return. Send extra cash to the highest-rate vehicle loan first. Keep contributing enough to get any employer 401(k) match, because the match is free money that no loan return can beat.
- Clear the loan while you still have a paycheck. Use cash savings, a bonus, or a temporary cut to your contributions. Avoid what Warshaw warned against: money pulled from a traditional IRA is taxed as ordinary income, so a $30,000 return can take significantly more than $30,000 out of the account.
- If you’re already retired with a payment, think about downsizing. Selling a newer car and buying a cheaper one with cash removes a fixed cost that would otherwise keep drawing on your portfolio every month for years.
- Keep making the payment to yourself. After the loan is gone, set up an automatic transfer of the same amount into a savings account for your next car. Then you can pay cash for it, and you’ll never need to ask what she calls the question of “how much a month” again.
Your retirement date depends as much on your fixed costs as on your savings, and paying off the car is one of the fastest ways to lower them.
Contact [email protected] for any questions or corrections.
Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
