I’ll be 65 in a couple months. I retired at 63 and am currently receiving survivor Social Security payments (from my late husband). I plan on switching over to my Social Security at 70. I receive about $31,000 yearly in Social Security. I also take $600 each month out of my retirement account.
I calculated all my monthly expenses (to include what my healthcare costs will be at age 65) and subtracted this from my monthly Social Security payments and the $600 I get each month from my retirement account and I am left with about $500.
I have about $320,000 in a retirement account (investments) and my home is paid for and valued at approximately $250,000.
The bad part is I am $46,000+ in debt (credit card, car and home equity loan).
So I am in need of advice on how to handle this debt to get it paid off. I am tempted to take more each month from my retirement account and make double payments against my debt – rather than take a large chunk out at once.
Any advice is so appreciated.
Thank you in advance for this consideration.
See: We’re 56, have $400,000 in debt, can save $50,000 a year and just want to retire – what should we do?
First – there are options for you to pay off your debt, and taking a lump sum from your retirement accounts should probably be the very last of them.
Start by compiling a list of all of your debts, the exact balances, the interest rates they’re charging and if there are any other stipulations (such as a deadline to pay them before interest rates rise). Once you have that, you can see where the brunt of your debt is, and make a repayment plan.
There’s no one-size-fits-all approach to withdrawing more from your retirement accounts to pay off your debts. As with most personal finance issues, it all depends on individual circumstances. That said, taking a lump sum from your investments would likely be detrimental to your future retirement security, as the returns on your portfolio will be based on a smaller balance. You need that money to last you the rest of your life.
Whether or not you should take out more money every month is another story. This decision should be based on a few factors though, including your repayment plan (how fast are you trying to pay this debt down, or how fast do you need to pay this debt down?) and how much more money you intend to take every month. You don’t want to dwindle your account too quickly – like I said, you do need that money to last you the …….