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Should you retire your debt before retiring?


As part of my retirement planning, I’m eyeing my mortgage. It’s got to go. I don’t want to drag that debt — or any debt — into retirement.

But an increasing number of seniors won’t be able to do the same. They are carrying significant debt into retirement, reports Robert Powell for TheStreet.

Consider this, Powell writes:
— In 2003, Americans 60 and older had $1 trillion in household debt (mortgages, home equity loans, auto loans, student loans, credit cards and the like).
— In 2016, they had $2.84 trillion in household debt, a nearly threefold increase.

[Read more: Retiring with Debt: Mortgage, Home-Equity Loans, Credit Cards]

[From NerdWallet: For Seniors, Rising Credit Card Debt Squeezes Tight]

Powell asks: “Can you afford to retire with debt or not?”

When it comes to your mortgage, examine whether it makes economic sense to continue to carry it given recent changes in tax law.

“Under the new tax law, fewer Americans will get the chance to deduct their mortgage interest on their tax returns,” Powell says. “That’s because the new tax law increased the standard deduction to $12,000 for single tax payers, $18,000 for head of household taxpayers, and $24,000 for married filed jointly taxpayers. The new tax law also eliminates the interest deduction for home equity indebtedness.”

[Read this from MarketWatch: What the new tax law will do to your mortgage interest deduction]

Is It Okay to Retire With Debt? MoneyTalksNews’s Marilyn Lewis ran that question by several experts.

“Plenty of experts — probably most — agree that debt in retirement is not a good thing if you can help it,” Lewis writes. “Some, though, make a distinction between good debt and bad debt.”

Good debt: “Borrowing for assets that appreciate.”
Bad debt: “Borrowing for an asset that loses value.”

Laurence Kotlikoff, economics professor at Boston University, told Lewis that a fixed low-interest rate mortgage isn’t a bad thing.

“When inflation takes off, you get to pay back your mortgage in watered down dollars and this offsets the fact that your pension or other stream of fixed nominal income loses real purchasing power,” he said. “So retiring with debt can be a hedge against inflation, provided it’s long-term, fixed-term borrowing.”

But Richard Cordray, former director of the Consumer Financial Protection Bureau, believes older Americans were better off paying off their mortgages before retiring.

Because your housing expense is typically your largest budget item, I’m in the “pay off your mortgage if you can” camp. But I know it can depend on a lot of factors.

[Read more from CNBC: Pros and cons of paying off mortgage before retirement]

What if you can’t be debt-free by retirement?

[Read this from WiseBread: What to Do If You’re Retiring With Debt]

Your thoughts
Did you take debt into retirement? I’d like to hear how you handled debt in retirement. If you paid it off, especially your home, how’s that working for you? Send your comments to

Retirement rants and raves
I’m interested in your experiences or concerns about retirement or aging. What do you like about retirement? What came as a surprise.

If you haven’t retired, what concerns you financially? You can rant or rave. This space is yours. It’s a chance for you to express what’s on your mind. Send your comments to Please include your name, city and state. In the subject line put “Retirement Rants and Raves.”

Last week, we discussed Trump’s 2019 budget and cuts to social program, including Medicare. I asked what you thought of the proposed changes.

Paul Wohlfarth of Ottawa Lake, Mich., wrote, “I’m a United Auto Worker retiree who has a fixed income pension and I also collect Social Security. I’m a year away from collecting my Medicare benefit. As a retiree, my family worries that the promises made by candidate Trump are not what President Trump is now supporting. His budget is causing inflation that’s a death nail to fixed-income pensions. Many retirees voted for Trump because of his promise to not cut their earned Social Security and Medicare. He promised to go after fraud and overpriced drugs not their life sustaining benefits. This is why he got elected. Now he’s bloating our budget deficits and cutting my benefits that will not only affect me but millions of extended families wondering how they can afford to take care of their loved ones. Most retirees do not have large savings in 401(k)s, they included Social Security and Medicare benefits in their future retirement plans. Most were adversely affected in the Great Recession of 2008. This budget is a death panel for seniors and a bold theft by the wealthy.”

Some readers noted that the cuts to Medicare are related to payments to doctors and hospitals and thus may not have an impact on seniors.

“I note that it has been correctly stated that these will be in the form of cuts to the providers of care not to patients but then only if they see a Medicare-accepting provider (who doesn’t these days?),” wrote T.M. Kiesel of Wyoming. “In the end, budgets are just that — division of available cash among many needs, and therefore there WILL be winners and losers, like it or not.”

Two experts addressed this issue in a MarketWatch report. Mark V. Pauly, a professor of health care management and of business economics and public policy at the University of Pennsylvania’s Wharton School and Kevin G. Volpp, director of the Center for Health Incentives and Behavioral Economics at Wharton, discussed the Medicare cuts.

They wrote: “While Medicare provides about $672 billion in annual benefits to 55 million Americans 65 and older or with disabilities, it is misleading to imply that the proposed changes are guaranteed to leave coverage or benefits unaffected; there has to be a limit to the ‘cut reimbursement growth and hope for the best’ strategy that goes back to the 2010 passage of the Affordable Care Act (where subsidies to the uninsured were largely financed by Medicare cuts). Most of the proposed savings from reducing Medicare-related hospital and physician payments come from decreasing allowances for bad debt, uncompensated care, post-acute care, graduate medical education and by paying hospital-owned clinics no more than non-hospital owned clinics. These types of cuts may be described as not directly affecting Medicare beneficiaries, but directly or indirectly these cuts will have some impact.”

[Read more: How Trump’s behind-the-scenes cuts to Medicare spending will hurt health care]

Steve from Texas wrote, “I just want to point out there is a difference between the services provided (Medicare, Medicaid, Social Security) and the cost to provide those services. I’m a senior and support our president. Suppose the services continue but at a smaller cost? Doesn’t that make sense?”

[Read: Winners and losers under Medicare drug plan in Trump budget]

[More on Trump’s 2019 budget from Vox: Trump’s 2019 budget: what he cuts, how much he cuts, and why it matters]

Suzanne Geisler of Springboro, Ohio, wrote, “My husband is 62. I am 58. We would like to look forward to retirement, but can we? Our concern is health care. I’m a type 1 diabetic. I am in relatively good health for a diabetic of 38 years. I’ve been wearing an insulin pump since 1986. Insulin pump therapy has been very successful for me. I don’t have any diabetes complications. But it is very expensive. Will Medicare be there to take care of me? Even if Medicare is there for us, my husband will probably have to keep working longer than he wants to cover my health insurance until I qualify for Medicare.”

Tom C. from Metairie, La., wrote, “One of the fundamental problems with the current administration is that the Republican Party thinks that health care is a privilege not a right. Until they get the concept that health care is a right not much will happen. Many other countries have the concept that health care is a right and there is coverage for all citizens. Over my working career I paid into Social Security and I paid into Medicare. As I paid into them, I do not view them as entitlements (in the negative sense of the term). We had an agreement (the Feds and myself) that I would pay in and there would be a Social Security check and that my health care would have coverage under Medicare. Fortunately, I am able to maintain health insurance from my employer as a secondary policy to Medicare. What is nauseating is that the cuts to social programs are roughly equal to the amount that has been given back as tax breaks to those who can afford health care and are not dependent on these programs for living and health care.”

“Is anybody surprised?” wrote Jerry Warshaw of South Orange, N.J. “ The president has lied about everything else, why should seniors think they would be excluded? Is this any different about than how he was going to get rid of military weapons on the streets of America, or balance the budget?”

Chris from Illinois wrote, “I live on SSI disability, Medicaid and a little Food Stamps. I’m 58. My income is $750 a month, which barely covers rent and necessities. Social Security rules forbid me from accumulating more than $2,000 in cash or liquid assets of any sort. Even if I could save enough to invest $2,000 (yeah, right), my benefits would be reduced by anything above that amount, every month I held more than $2,000. So basically I’m screwed even before Trump’s cuts, but his proposal would finish me off. And then, our nation’s 100 million taxpayers could collectively save the $750 a month my life is now worth.”

On retirement in general

Claire Gawinowicz of Oreland, Pa., wrote, “Out of the loop, desperately trying to reinvent myself, insomnia, old age/illness, getting up every damn morning trying to fight Trump. Retirement — what’s not to like?”

Sue Paolini of Crofton, Md., is enjoying retirement, writing, “I retired the end of September from the civil service after 32 years. I loved my work and the people I worked with, so had some worries about the change. I am very surprised at how easy the transition has been and how much I enjoy being retired. There is time to take walks, read, plan healthier meals, visit my folks frequently, and spend time with friends and family. It is wonderful not to have my three hours of daily commute, worries about schedules, and a ‘to do’ list that was always ahead of my ‘done’ list. I’m giving myself six months of ‘vacation’ and then plan to get involved in volunteer work. I’m still getting used to the income drop, but I am fortunate to have an annuity.”

Newsletter comments policy
Please note it is my personal policy to identify readers who respond to questions I ask in my newsletters. I find it encourages thoughtful and civil conversation. I want my newsletters to be a safe place to express your opinion. On sensitive matters or upon request, I’m happy to include just your first name and/or last initial. But I prefer not to post anonymous comments (I do make exceptions when I’m asking questions that might reveal sensitive information or cause conflict.)

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