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A12    BUSINESS
                    Friday 19 January 2024


                                                                      What to do about debt in retirement






                                                                                                                                Moving to a smaller home
                                                                                                                                or  to  an  area  with  a  low-
                                                                                                                                er  cost  of  living  can  free
                                                                                                                                up  room  in  your  budget.
                                                                                                                                You  might  also  get  better
                                                                                                                                weather, to boot.
                                                                                                                                “We  have  a  fair  amount
                                                                                                                                of  clients  who  are  mov-
                                                                                                                                ing  from  more  northwest-
                                                                                                                                ern  states  with  a  higher
                                                                                                                                income  tax  and  colder
                                                                                                                                weather  down  to  places
                                                                                                                                like  Florida,”  says  Crystal
                                                                                                                                McKeon, a CFP in Houston,
                                                                      A Social Security card is displayed on Oct. 12, 2021, in Tigard,   who notes that Florida has
                                                                      Ore.                                                      no  state  income  tax  and
                                                                                                               Associated Press   decidedly  warmer  weath-
                                                                                                                                er.
                                                                      By KATE ASHFORD of Nerd-     ods that can help.           Andrew  Herzog,  a  CFP  in
                                                                      Wallet                       PICK UP SIDE WORK            Plano,  Texas,  recalls  a  cli-
                                                                      A growing number of older    The  traditional  retirement   ent   who’s   considering
                                                                      adults are in debt in retire-  model    work  for  40  years   moving to a smaller home
                                                                      ment,  according  to  the    and then quit forever  may   that’s closer to his  daugh-
                                                                      2022  Survey  of  Consumer   not be the most appropri-    ter, easier to maintain and
                                                                      Finances  from  the  Federal   ate  approach  anymore.    potentially  mortgage-free
                                                                      Reserve.  Among  people      Supplementing  retirement    if  he  can  sell  his  current
                                                                      ages  65  to  74,  the  share   savings  and  Social  Secu-  house  for  a  high  enough
                                                                      with  debt  rose  to  65%  in   rity  benefits  with  part-time   price.
                                                                      2022,  up  from  50%  in  1989   earnings  can  make  your   “Downsizing  can  abso-
                                                                      (the  first  time  this  question   money  go  further  and   lutely  work,”  Herzog  says.
                                                                      was asked). For people 75    help you pay off remaining   “It’s best when you do it for
                                                                      and over, 53% report hold-   debt.                        multiple reasons.”
                                                                      ing debt in 2022 versus 21%   For  some  people,  consult-  TIME  YOUR  SOCIAL  SECU-
                                                                      in  1989.  This  is  a  big  chal-  ing  in  their  field  is  a  natu-  RITY BENEFITS
                                                                      lenge,  since  people’s  in-  ral  step  between  full-time   The  Social  Security  equa-
                                                                      come  in  retirement  is  tra-  work  and  full-time  play.   tion  when to claim, when
                                                                      ditionally limited. But there   Other  people  can  mon-  to  wait    depends  on  your
                                                                      are  strategies  for  tackling   etize an interest or pick up   health,  your  marital  status
                                                                      your balance sheet later in   hourly  work  a  few  days  a   and your savings. But debt
                                                                      life.                        week.                        can also affect your plans.
                                                                      Take  note:  Not  all  debt  is   “We  have  a  client  who   Taking Social Security early
                                                                      bad  debt.  “It’s  not  nec-  works in a music repair shop   might give you the income
                                                                      essarily  the  worst  thing  to   for part-time income,” says   you need to get rid of your
                                                                      have,”  says  Jack  Heintzel-  Colin  Day,  a  CFP  in  St.   balances.
                                                                      man,  a  certified  financial   Louis. “They get to explore   “As  long  as  I’m  not  blow-
                                                                      planner  in  Boston.  If  it’s   their hobby while also get-  ing  up  my  plan  by  draw-
                                                                      debt that earns you a tax    ting some level of income.”  ing  Social  Security  early,  it
                                                                      deduction,  he  says,  like  a   CONSIDER  MOVING  OR     could  help  sustain  me  by
                                                                      mortgage, it may be fine to   DOWNSIZING                  not  having  to  draw  down
                                                                      hang onto it while you give   Your  home  is  usually  one   my investment assets,” Day
                                                                      your  money  elsewhere  a    of  your  biggest  expenses,   says.
                                                                      chance to grow.              and  if  you  live  in  a  high-  On  the  other  hand,  wait-
                                                                      But if debt is straining your   cost  area,  you  might  be   ing  to  claim  means  you’ll
                                                                      retirement    budget    or   paying high property taxes   have  a  higher  Social  Se-
                                                                      you’re paying a high inter-  and  maintenance  costs,     curity check later  benefits
                                                                      est rate, a pay-it-off plan is   which  eat  into  your  ability   increase by 8% per year af-
                                                                      key. Here are some meth-     to pay for other things.     ter full retirement age until
                                                                                                                                age 70.
                                                                                                                                Depending on the type of
                                                                                                                                debt,  it  may  be  better  to
                                                                                                                                wait  until  you  can  throw
                                                                                                                                more  money  at  it.  Talk  to
                                                                                                                                a  financial  professional
                                                                                                                                about  the  best  option  for
                                                                                                                                you.
                                                                                                                                “I  would  do  the  calcula-
                                                                                                                                tions,” Herzog says. “That’s
                                                                                                                                a pretty big asset for peo-
                                                                                                                                ple when you’re older.”q
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