Recently I met with Rob and Laura (not their real names) interested in retiring within the next 3 years at the age of 66. In reviewing their finances, it became clear they were at least 6 years away from retiring. Why?
Because of student loans they had taken out for their children.
According to a report issued by the Consumer Financial Protection Bureau, ‘student loan debt is a problem for a fast-growing number of older Americans’.
‘The debts can cause serious problems for the over-60 set’ the bureau says.
Defaulting on student loan payments can have serious consequences:
- One of the consequences for older Americans is having their Social Security benefits reduced to pay the debt.
- The federal government also can garnish a borrower’s wages and take money from tax refunds.
I am seeing more and more people forced to delay retirement until 70 or beyond because of student debt.
What Not To Do?
Do not withdraw money from your retirement plan to pay off a loan. This might seem like an easy fix but it comes with major problems – All of them bad.
- First, withdrawals reduce the amount of money you will have to live on in retirement.
- Secondly, the withdrawal amount will be added to your taxable income which could put you into a higher tax bracket.
- And finally, the higher income will increase your Medicare Part B premiums in the event you do retire in the next year or so.
What to Do?
Seek Help! Student loans can be very complex to repay because loans can come from multiple sources. However, I have seen successfully strategic ways to re-pay or re-structure the loans
And in some cases, loans can be forgiven.
Here are resources to which I have referred clients. I do not receive any remuneration from them, but I know they are very helpful.
- Paul Garrad: www.pgpresents.com
- Adam Minsky JD: www.BostonStudentLoanLawyer.com; 517-942-1524
- Consumer Credit: located in Waltham MA and other parts of the country www.ConsumerCredit.com
Are you wondering what happened to Rob and Laura? They restructured the debt and we strategized a successful retirement.
Please reach out if you have any questions. And please pass along these resources to others who might benefit from the information.