How Does Debt Impact Retirement Planning?

Ideally your debt should “retire” before you do. Loans with a high rate of interest and without any tax benefits should be paid off aggressively before your retire, because they can eat into your savings and reduce your standard of living. Any student loans you have outstanding should also be paid off before retiring. Up to 15% of your social security benefits may be garnished if your payments on student loans fall behind.

Speak to an F&M Trust relationship manager for guidance before you withdraw money from an IRA or other retirement plan in a lump sum to pay off debt, especially if you are under age 59½.

Can I Borrow Money After I Retire?

Borrowing money after retirement has unique challenges, but there are several methods available to lenders when a borrower is drawing on their personal assets to make installment payments. One option to consider is a home equity line of credit (HELOC) prior to retirement. This type of loan is easier to obtain when the borrower can show a consistent income (such as wages), and can remain unused until needed later, at minimal to no cost. Interest rates on HELOCs are typically variable, so borrowers should keep that in mind, but they can provide needed flexibility and liquidity in retirement.


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