If I Could Just Lose 10 Pounds

An important lesson that I learned in my triathlon days was that weight mattered.  Training is important, but when you want to get your bike up a long hill faster, you need to drop your weight.  Lugging an extra 10 pounds up a mile long hill makes a big difference.  Debt in retirement is that extra weight that you need to get rid of as soon as possible.  As I advise my clients I always ask questions about home mortgages, car or student loans and credit cards.  We can enjoy more of our retirement funds and lower our income need if we are not carrying debt.  Many people are adding to their 401k plans beyond what the company will match.  If you have credit card debt with a high interest rate, my advise is to pull those contributions back and attack the credit cards.  I will get questions like, “Should I take $10,000 out of my rollover and payoff my car loan?”  My response is that you will need to take $12,000 out to payoff the $10,000.”  Why the higher amount?  Because your 401k is pretax and you would need to withhold some money to cover your taxes.  I strongly recommend against pulling lump sums out to payoff a large debt.  Instead, I want to work with my clients to build a plan of attack against their debt.  Being debt free for some can be challenging because they have always carried it in their adult lives.  It may not be possible to begin retirement debt free, but your plan should incorporate a strategy to eliminate (especially credit card debt) as fast as possible.  So skip the potato chips and throw the extra dollars at the VISA bill.