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 kids and my ex

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

I plan to retire late next year with $25,000 in credit card debt and 15 more years to pay my mortgage. The credit cards have 0% interest. I have good medical coverage when I retire and it covers my two sons under 26. My monthly expenses are $2,000 including life insurance, utilities and a car payment.

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

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

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

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

Please help.

Many Thanks.


See: I am a 57 year old registered nurse with no pension plan and would like to retire within seven years. What can I do?

Dear CDT,

You have a lot of juggling to do, so the fact that you’re reaching out to someone for financial support should be seen as an accomplishment in its own right!

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

“I think she needs to take a good look at her income and expenses,” said Tammy Wener, financial advisor and co-founder of RW Financial Planning. “When it comes to retirement, so many things are out of your control, like inflation and investment returns. The only thing you have control over is spending.” Additionally, your pension may be enough to sustain your lifestyle — although advisors wondered what exactly you would get out of that pension each month — but you’d still be better off turn if you could fall back on a larger nest egg.

Let’s say you’re retiring next year, but you still have credit card debt and big bills to pay. Any retirement income you have, both within and outside of your current means, may not be sufficient for your current living expenses, and if you realize this in a few years, you could return to the labor market – although the same can be difficult or difficult to achieve a similar job that you already have.

Let’s take a quick look at your 401(k) and 457 plans. You said you could take out a loan and not have to pay it back because of your performance, but you should be extremely careful with that. With 401(k) loans, employees may have to repay that loan if they are separated from their employers, so this is a condition you should definitely check. If there was a misunderstanding about how a loan is treated, that remaining loan would be treated as taxable income when you quit your job, Werner said.

Financial advisors typically warn investors against borrowing and withdrawing from retirement accounts if they can avoid it, and in your case that may be especially true if you’re planning to retire in the next year. If you take out a loan, you may pay 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 those Americans who borrowed or withdrew are now regretting it, a recent poll found. “I wouldn’t recommend swapping debt by taking out a loan from your investments,” said Hank Fox, a financial planner. “Instead, she should pay the amount due each month to avoid financing costs and continue to settle the balances.”

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Also, consider what would happen if you kept working: you could still pay into a retirement account, top up your savings, and possibly reap the rewards with an Employer Match. They would also limit the time you have between retirement and when you can start claiming Social Security benefits, Fox said.

Outside of retirement accounts, you should try to build a “sizable” emergency fund, Werner said. Financial advisors typically suggest three to six months of living expenses, although you might want to aim for closer to six months to even out undesirable scenarios.

I’m not sure what the motivation was for retiring next year, but if you can delay it might be the best solution. “The first thing I would recommend is that she consider retiring next year,” Fox said. “As she turns 57 in November and assuming she is in good health, she should expect to be retired for 30 years or more.”

If postponing retirement isn’t an option, and it’s not always the case, he suggests reducing or eliminating your mortgage, as that’s by far your biggest expense. They could refinance themselves, Werner said. Interest rates are very low these days and while you might be paying a little more every month for the next two years compared to the 2% interest rate you currently have, from February 2022 you would be paying the same and then less.

As for your credit cards, a 0% interest rate is a big help in paying off debt faster. So you should try to extend this benefit by either calling your current credit card company and asking about your options, or looking for an alternative 0% rate card.

A financial advisor — particularly a certified financial planner — could really help you analyze the numbers and come up with sensible ways to make the most of the money you have now and will retire to, said Vince Clanton, principal and investment Advisor representative at Chancellor Wealth Management.

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

Letters are edited for clarity.

Do you have questions about your own retirement provision? Email us at 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 kids and my ex

Brian Lowry

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