If I'm 63 with $130,000 in debt and $170,000 in my 401(k), can I ever retire?
I am 63 years old and recently divorced. I earn $68,000 a year and had always planned to retire when I reach my Full Retirement Age in March 2025. However, as a result of the divorce, I now have $100,000 in unsecured consumer debt and another $30,000 in student loans, and about $170,000 in my 401.
There are a few ways to tackle your debt. One strategy is to pay down the debts with the highest interest rates, so that you’re paying as little interest as necessary. Another choice is to pay minimums on any and all accounts except the card or account with the smallest debt — that’s where you’d put extra cash. When that account is paid off, move that extra cash flow to the next smallest debt load, and so on. This is known as the “snowball” effect.
If the bankruptcy option does not sound appealing to you, don’t worry. Matthew Benson, a certified financial planner and owner of Sonmore Financial, suggests making it a goal to pay off the debt in two to three years, which might require finding extra income through overtime, taking on a side job temporarily or pushing your expected retirement date back a little .
Remember these are also just suggestions — you have to do what you can to improve your situation and not burn yourself out even more. “I assume her consumer debt interest rate is higher than the growth factor on her Social Security, so if she cannot eliminate or refinance the debt, filing early might make sense,” he said.
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