I want to retire next year, but I have $25,000 in credit card debt and a large monthly mortgage payment – I also live with my three children and ex

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I will be 57 next month and am divorced and have three children living with me. One is 28, she works, another is 21 and a senior (with a full scholarship) and the youngest is 15 (a high school sophomore with a full scholarship).

I plan to retire by the end of next year with $25,000 in credit card debt and 15 more years to pay my mortgage. The credit cards have 0% interest. I will have good medical benefits when I retire and it will cover my two sons under 26. My monthly expenses are $2,000, which includes life insurance, utilities, and a car payment.

My mortgage is about $4,000 a month repossessed. The interest is 2% until January 2022, then 3% until January 2023 and the remaining loan is 4.5%. Is it worth refinancing to a lower rate? I also plan to pay only principal and interest in December and April. I have two credit cards: one with a total of $20,000, with the 0% promotion ending in April 2021, and another with $4,500, with the 0% interest promotion ending in December.

I work for the state and have a pension and 401(k) and 457 investments totaling $110,000. I also have a month of expenses in an emergency fund. I can only apply for a loan for the retirement accounts while I am employed.

I would like to ask if it is a good idea to retire. If so, is it appropriate to take out a loan with my investment to pay off the credit card debt before I retire? Based on our benefit, I won’t have to repay the debt (to the 401(k)) after retirement unless I win the lottery or something. There will be no punishment. My gross annual income is € 96,000.

I live in the house with my ex but get no contribution from him at all. I’m working with my lawyer to see if I have the right to kick him out of the house.

Please help.

Thank you.

CDT

To see: I am a 57 year old nurse with no retirement savings and I want to retire in seven years. What can I do?

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Dear CDT,

You have a lot to juggle, so reaching out to someone for some financial guidance should be considered an achievement in itself!

The truth is you may want to wait to retire if you can. Having $110,000 in retirement accounts is great, and you don’t want to start reducing that while also trying to find a way to effectively pay off credit card debt and a mortgage. Should an emergency arise, taking a large portion of that nest egg can hurt you significantly in the long run.

“I think she needs to look closely at her income and expenses,” said Tammy Wener, financial advisor and co-founder of RW Financial Planning. “When it comes to retirement, you have so many things out of your control, like inflation and investment returns. The only thing you do have control over is the expenses.” Furthermore, your pension may be enough to maintain your lifestyle – although advisors wondered what exactly you would get from that pension each month – but you would still be better off with a bigger nest to fall back on.

Let’s say you retire next year, but you still have credit card debt and huge bills to pay. Any retirement income you have with and outside of your current funds may not be enough for your current living expenses, and realizing this in a few years will help you get back to work – although it may be hard to do the same. get a job or a similar job you already have.

Let’s take a look at your 401(k) and 457 plans. You said you could take out a loan and based on your benefit you don’t have to pay it back, but you need to be extremely careful about this. 401(k) loans allow employees to repay that loan if they are separated from their employers, so this is a provision that you absolutely need to verify. If there was a misunderstanding about how a loan is treated, that remaining loan would be treated as taxable income when you left your job, Wener said.

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Financial advisors usually warn investors not to take out loans and withdrawals from retirement accounts if they can avoid doing so, and in your case, this could be especially the case if you plan to retire next year. When you take out a loan, you may be paying back yourself and your account, but your balance will be reduced by the amount of the loan, meaning you could miss out on investment returns. Amid this pandemic, many of the Americans who have taken out a loan or have now regretted it, a recent survey finds. “I wouldn’t recommend ‘exchanging debt’ by taking out a loan from its investments,” said Hank UKTN, financial planner. “Instead, she should pay the amount owed each month to avoid the borrowing costs and continue to pay off the balances.”

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Also consider what would happen if you continued to work: You could still contribute to a retirement account, increase your savings and, if applicable, reap the rewards with an employer match. You would also limit the amount of time you have between retirement and when you can claim Social Security benefits, UKTN said.

Outside of retirement accounts, you should try to build a “significant” emergency fund, Wener said. Financial advisors typically suggest three to six months of living expenses, although you may want to aim for closer to six to offset any unwanted scenarios.

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I’m not sure what the motivation was for retiring next year, but if you can postpone it, this might be the best solution. “The first thing I would recommend is that she reconsider retiring next year,” UKTN said. “Since she will be 57 in November and assuming she is in good health, she could retire for 30 years or more.”

If postponing retirement isn’t an option, and it isn’t always the case, he suggests lowering or terminating your mortgage, as this is by far your biggest expense. You could refinance, Wener said. Interest rates are very low these days, and while you might pay a little more each month for the next two years compared to the 2% rate you currently have, from February 2022 you’ll be paying the same and then less and On.

As for your credit cards, a 0% interest rate is such a huge help in paying off debt faster, so you should try to extend that advantage, either by calling and asking about your options with your current credit card company or by looking for alternative options. 0% interest cards.

A financial advisor — especially a certified financial planner — can really help you crack the numbers and find meaningful ways to get the most out of the money you have now and retire, said Vince Clanton, president and representative of investment advisors at Chancellor Asset Management.

An advisor can gather information about your current income and expenses, retirement savings, potential Social Security benefits and retirement, and prepare a financial plan to help you through your retirement. “Voluntary retirement, and especially early retirement, are very important decisions,” Clanton said. “It is extremely important to know and understand all the variables.”

Letters have been edited for clarity.

Do you have a question about your own retirement savings? Email us at [email protected]

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