Dear Liz: We intended to keep saving for retirement until our mid to late 80s.
Now, unexpected home repairs are coming up that could cost us tens of thousands.
I’m wondering if I should take money out of my retirement savings and deal with the 22% tax hit, or maybe consider a home equity loan, or perhaps find a mix of both? Do you have any other suggestions?
Answer: Clearly, any money you use now won’t be available to grow for your retirement. If you withdraw too much from your savings, you might exhaust your funds long before you retire.
But taking out a loan means you’ll have to pay interest, which could strain your living expenses and drain your retirement savings quicker than planned. The best choice really hinges on your unique circumstances. A financial advisor can give you tailored advice.
There are other options, too. For example, with a reverse mortgage, you could access your home equity without needing to pay the loan back until you sell your home, move out, or pass away. Alternatively, consider selling your house and moving to a place that requires less maintenance, like a condo or retirement community. There isn’t a one-size-fits-all answer, but exploring your choices might clarify what’s right for you.
Dear Liz: I’ve paid off my high-interest credit card. Should I close the account or keep it open? I’ve heard that closing it can reduce my available credit and impact my credit score. I really don’t want to use these high-interest cards anymore.
Answer: If you pay off the balance monthly, then the interest rate isn’t a concern. That’s really the best way to use credit cards.
However, closing several cards at once can hurt your credit score. Generally, it’s advisable to leave the account open if you can, and maybe use it for small purchases to prevent the issuer from shutting it down.
On the other hand, if you’re not sure you can use the card wisely, closing it might be the safer route. You could also consider asking your card issuer for a “product change” to a low-interest option.
