Page 12 - aruba-today-20240119
P. 12
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