Dear Liz: We had a plan to make our retirement savings last until our mid- to late 80s. Now we have unanticipated house repairs that could amount to tens of thousands of dollars. Should we draw down our retirement savings and pay the associated taxes at a 22% rate, or take out a home equity loan, or some combination of that? Or are there other ideas?
Answer: Obviously, money that you spend can’t generate future returns to help fund your retirement. Liquidate too much of your nest egg, and you could find yourself short of funds long before your retirement ends.
But loans require paying interest, increasing your living costs and causing you to draw down your retirement funds faster than intended. Which is the better option depends on the details of your situation. A fee-only financial advisor or accredited financial counselor could give you personalized advice.
They will also be able to discuss additional options. A reverse mortgage could allow you to tap your home equity without having to repay the loan until you move out, sell the home or die. Or maybe it’s time to sell the house and move to a lower-maintenance living situation, such as a condo or retirement community. There’s no one-size-fits-all solution, but discussing the possibilities will help you clarify which is the best approach for you.
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