Managing your money in retirement is much simpler when you don’t have to debt to account for, but there are times when debt isn’t necessarily a bad thing. In this week’s Money Wisdom question series, Jake Doser, CFP®, CPWA® and Nicholas J. Colantuono, CFP® tackle a listener’s question about whether it’s wise to carry debt into retirement. This discussion addresses the pros and cons of carrying debt into retirement, particularly focusing on mortgages and home equity lines.

It’s not uncommon to have conversations with clients about the merits of being debt-free versus maintaining low-interest debt like mortgages and home equity lines. Not all debt is created equal and understanding the difference between good and bad debt is crucial. Good debt, such as low-interest mortgages, can be a strategic financial tool, while bad debt, like high-interest credit card balances, can be detrimental to your financial health.

Like much of financial planning, it often comes down to math. Interest rates play a big part in determining the quality of debt. You have to weigh opportunity costs and how the money tied up in debt could potentially work harder for you elsewhere. Interest rates can impact your financial strategy, especially in retirement, so make sure that’s one of your considerations.

Cash flow management is another vital topic covered in this episode. Managing your cash flow effectively can help you maintain financial stability in retirement. But be careful about becoming “house rich and cash poor,” where all your assets are tied up in your home, leaving you with limited liquidity for unexpected expenses.

No matter where you are in your retirement planning journey, the “Are You Ready to Retire” Starter Kit can be a very helpful tool. Get access to it by texting KIT to 800-757-0436, and make sure you tune in to the Money Wisdom podcast to gain a deeper understanding of debt management to help ensure you’re on the right path to a secure and fulfilling retirement.

Here’s what we discuss in this episode:

0:00 – Intro

1:19 – Today’s question on debt

1:46 – Good debt vs bad debt

3:11 – Threshold for good debt

6:30 – Debt in retirement