Debt Adviser, the pseudonym of a writer on redding.com, has recently received a question from “Doris” – the wife of a soon-to-be-retiree. Doris was concerned about what to do with the $52,000 her husband will get in his retirement plan.
Debt Adviser first congratulates Doris for coming up with these concerns before her husband retires, as bad decisions are generally harder to deal with if there is no day job to cover the losses.
He then cautions Doris about taking the money out from the plan to pay part of the mortgage, as they will incur tax penalties for the withdrawal and could risk pushing themselves up by one tax bracket. That is unless the money is rolled into another retirement account, wherein there will be no tax penalties involved.
The more important danger, however, involves replacing the lost retirement funds. Debt Adviser cautions that it will be difficult to replace depleted funds without a regular job. He then encourages Doris to create a spending plan by first anticipating essential expenses and then evaluating available financial options with the remaining money.
Debt Adviser also recommends that Doris and her husband think about going for home equity loans, as this will allow them to erase their mortgage and divert the money elsewhere. “A good financial planner can tie all this and more together for you,” Debt Adviser says to wrap up the column.