Having debt or not having debt in retirement -- seems like saying "no debt" would be the obvious answer, but the actual decision needs to be made in context of your situation. I'll retire this year probably at age 69, start taking social security at age 70, wife will still work and bring in a hefty income for another 2.5 years, and I have a net worth of over $3 million. Debt is part of what got me here. I have a mortgage on my home of $385K at 3.25% and the house is worth over a million. If the debt became a burden I would downsize the house (which is twice as big as we need now), pull out the $700K of equity and buy a smaller house with cash. Context! I have 2 other mortgages totaling $600K on vacation rental properties, at 3%, with the rentals being worth $1.1 million, and the rentals will generate a net profit of $35k this year, and can be reliably expected to generate no less than $20K even in bad years. If the debt became a burden I sell the rentals, eliminating the debt, and walk away with $500K. I'll sell them anyways at some point after I retire. Context. I have a $2K loan left on a car at 2.5%, an $11K loan left on a home improvement at 0%, and I pay off all my credit cards in full every month. These loans will go away soon, but the cost of the debt is far less than what my investments will earn. I'd rather not have the debt, but in Context, it really doesn't matter much. My calculations are that with an income of $125K/yr, I can easily handled the debt for as long as it lasts. And between social security and investment income from retirement accounts, I can easily bring in that annual income. And again, if the economy really tanks, I have assets that can be sold without seriously compromising my lifestyle. My financial strategy has always been to build my net worth, NOT to build my annual income. Sometimes I leverage debt, to build my net worth. I started with nothing. Now I have a lot. I'm not bragging - well maybe a little bit. But my point is to have a strategy, and if the strategy means you have debt, just make sure the strategy generates income to cover debt payments, and gives you have options to eliminate the debt if things go wrong. And a good insurance policy helps too. The automatic "anti-debt no matter what" point of view is not helpful, unless you have no strategy.
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Having debt or not having debt in retirement -- seems like saying "no debt" would be the obvious answer, but the actual decision needs to be made in context of your situation. I'll retire this year probably at age 69, start taking social security at age 70, wife will still work and bring in a hefty income for another 2.5 years, and I have a net worth of over $3 million. Debt is part of what got me here. I have a mortgage on my home of $385K at 3.25% and the house is worth over a million. If the debt became a burden I would downsize the house (which is twice as big as we need now), pull out the $700K of equity and buy a smaller house with cash. Context! I have 2 other mortgages totaling $600K on vacation rental properties, at 3%, with the rentals being worth $1.1 million, and the rentals will generate a net profit of $35k this year, and can be reliably expected to generate no less than $20K even in bad years. If the debt became a burden I sell the rentals, eliminating the debt, and walk away with $500K. I'll sell them anyways at some point after I retire. Context. I have a $2K loan left on a car at 2.5%, an $11K loan left on a home improvement at 0%, and I pay off all my credit cards in full every month. These loans will go away soon, but the cost of the debt is far less than what my investments will earn. I'd rather not have the debt, but in Context, it really doesn't matter much. My calculations are that with an income of $125K/yr, I can easily handled the debt for as long as it lasts. And between social security and investment income from retirement accounts, I can easily bring in that annual income. And again, if the economy really tanks, I have assets that can be sold without seriously compromising my lifestyle. My financial strategy has always been to build my net worth, NOT to build my annual income. Sometimes I leverage debt, to build my net worth. I started with nothing. Now I have a lot. I'm not bragging - well maybe a little bit. But my point is to have a strategy, and if the strategy means you have debt, just make sure the strategy generates income to cover debt payments, and gives you have options to eliminate the debt if things go wrong. And a good insurance policy helps too. The automatic "anti-debt no matter what" point of view is not helpful, unless you have no strategy.
Post: Is it okay to retire with debt?
Link to comment from August 21, 2021