Podcast Episode 385: Is It Okay to Carry Debt in Retirement?
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
Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.
Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.
Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.
The guarantees provided by any type of insurance contract are based on the claims-paying ability of the insurance company.
Related Resources
-
Health Care Expenses in Retirement
Of all the expenses to expect in retirement, health care often makes up a significant portion of your costs. Monthly premiums, out-of-pocket expenses, and services not covered by Medicare can quic… -
Income Planning 101
You’ve spent the last few decades saving for retirement but are you truly prepared? To help address any concerns or uncertainties you may have, you need an income plan – one that considers every f… -
Frequently Asked Social Security Questions
Almost every American is impacted by Social Security in some way, so it’s no wonder that it’s one of the most frequently asked topics in retirement planning. When and how you start taking benefits… -
Maximizing Your Social Security Income
Social Security can serve as a safety net for many retirees, sometimes acting as a primary source of income. However, the program is highly complex with over 500 ways to claim benefits. Even one o… -
How Much Money Can I Spend in Retirement?
“How much can my spouse and I realistically spend in retirement at age 62 with $1 million saved?” Today’s hypothetical couple is asking the very question that most pre-retirees ponder when gearing… -
How Will I Receive Income from My Retirement Savings?
Today’s question centers around the core of retirement planning – how do I turn my retirement savings into retirement income? After decades of building up your nest egg, life after work introduces… -
What Should My Tax Plan Be at Age 65 with $1 Million?
Approaching retirement with $1 million saved is an impressive milestone, but turning those savings into a sustainable income stream requires careful planning. At age 65, many retirees face the cha… -
What to Consider Before Moving in Retirement
If you have the liberty to relocate in retirement, does that mean you should? Maybe you’re a snowbird who wants to live down South full-time, or maybe you want to stick it out in the cold and spen… -
Dodging the Tax Torpedo
When envisioning the next chapter of your life, the impact of taxes can often be overlooked or forgotten altogether. The reality is, without the proper planning, you may be at the mercy of an impe… -
What Habits Should I Unlearn Before I Retire?
Today’s insightful question explores the behavioral finance side of retirement planning – specifically, which financial habits you should leave in the rearview as you transition into retirement. …
