Imagine you’ve worked hard, saved up, and now you’re ready to enjoy retirement. You’re 68, debt-free, and living comfortably in a paid-off co-op. Sounds pretty good, right? But then, your financial advisor suggests something that makes you do a double-take – start taking Social Security early and take out a new mortgage just to avoid dipping into your 401(k). Wait, what?
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That’s the scenario Helene, a retiree, found herself in. She’s been living mortgage-free for over 30 years and plans to buy a home in a 55-plus community in New Jersey. But when her advisor told her to take out a bigger mortgage and start Social Security early, Helene decided to get a second opinion from none other than Suze Orman.
If you’ve ever heard Orman’s advice, you know she’s not one to bite her tongue. When Helene asked whether she should follow her advisor’s advice, her response was loud and clear: “Absolutely not – over my dead body!”
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Orman didn’t hold back. She pointed out that if Helene truly trusted her advisor’s recommendation, she wouldn’t be asking for a second opinion in the first place. And let’s be real – taking out a mortgage just to cover bills when you’re already debt-free? Orman was having none of it.
Taking on new debt in retirement might seem like a big deal to some, but when you’ve been debt-free – going back into debt electively isn’t ideal. Having debt in retirement isn’t uncommon, though. A 2019 study found that 37% of homeowners aged 65 and older had mortgage debt, up from just 22% in 2001. Even more surprising? The median amount owed by these older homeowners more than doubled from $43,400 in 2001 to a whopping $95,000 in 2019. That’s a lot of stress to carry into your golden years, and Suze is all about avoiding unnecessary financial burdens.
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“Why would you want to take on new debt at today’s interest rates to pay some bills?” Suze questioned. She reminded Helene that the whole point of saving and investing is to feel secure, not to create more financial stress. Owning your home outright is a huge part of that security.
But Suze didn’t just dismiss the idea without giving Helene solid advice. She encouraged her to think about what makes her most secure – starting Social Security now, waiting, or deciding when to dip into her 401(k). Suze emphasized Helene controlling her financial decisions: “You make that decision, girlfriend.”
And speaking of Social Security, it’s worth noting that delaying it until age 70 can bump up your monthly benefits by as much as 32% compared to claiming it at full retirement age. But guess what? Only about 10% of Americans wait until 70 to claim Social Security, according to a Schroder survey, even though the financial benefits are pretty clear. Suze wants Helene to think long and hard about what will make her feel the most secure in the long run.
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Before making big financial decisions, especially in retirement, consider talking to a qualified financial advisor who understands your goals and situation. While Helene’s advisor might have given her questionable advice, it’s still worth getting an expert opinion. But remember, it’s your money and your future – make sure the advice you’re getting feels right for you.
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This article 68-Year-Old Is Told To Take Out A Bigger Mortgage For Bills Rather Than Tap Into 401(k): Suze Orman Says ‘Absolutely Not – Over My Dead Body!’ originally appeared on Benzinga.com
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