At any stage in life, debt can interfere with your financial goals. But what about when you retire? How much debt is too much? It depends on a variety of factors, including your income relative to your expenses and the type of debt you’re dealing with.

In this week’s Money Wisdom Question Series, Heath Grossman, CFP® shares his insights into managing this significant financial burden in retirement.

Can Your Income Cover Your Expenses?

First and foremost, you want to create a retirement income plan. As with any expense, your debt repayment should be factored into your monthly budget. Start by determining how much debt you have to repay each month in comparison to your other expenses. Will your income cover it, or will you have to tap into your pension or take Social Security earlier than expected?

If you find yourself needing to withdraw a high percentage of your assets to repay this debt, it may be too much to carry into retirement. However, if your income, along with a moderate withdrawal from your assets, will cover your monthly repayment while still allowing you to live comfortably, that could be very feasible.

What Type of Debt Do You Have?

It’s also important to consider the type of debt you have. For example, having a mortgage with a low interest rate in retirement is very different from accumulating credit card debt and being unable to pay off the balance each month. Late credit card payments can negatively impact your credit score and lead to higher interest rates. Depending on your credit behavior, this type of debt may be less than ideal to have as you approach or enter retirement.

Carrying debt into the next phase of your life doesn’t necessarily mean you have to delay your retirement plans – just make sure that it is manageable. If you’re considering reducing or eliminating this financial burden, a financial advisor can help you effectively manage your debt as a part of your overall retirement income strategy.