Ask The Get Out of Debt Experts Retirement Related

I’m Retired and Wonder if I Should Use My Retirement Money to Pay Off Debt. – Karen

Written by Steve Rhode

“Dear Steve,

I am a 62 year old single woman. I retired in June with a fixed PERS retirement pension and am also collecting my social security pension for a total of annual income of about $64,000. I have about $20,000 left in credit card debt that I have been paying down on a fixed debt reduction plan that I set up myself….I will be debt free by March 2015 on this plan, with the exception of my car payment (0% interest) which will be gone by August 2016.

I have about $30,000 in a 403B that I do not currently withdraw from and is approximately making about 4-8% interest annually (with the exception of losing a lot during the recent downward fall…but I do have about what I put in there)

My question is should I take money out of my 403B and pay off my credit card debt or just stay on my current plan?


Financing a budget

Dear Karen,

Do you have any assets or equity in your home?

Isn’t your 403(b) back to it’s 2009 level? The stock market has rebounded 116% or so since that time.

Are you able to afford your debt reduction program and make minimum payments plus extra each month?

Are you planning to work anymore or are you now relying on your pension 403(b) from this point forward?

Please post your responses and follow-up messages to me on this in the comments section below.


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.


  • Hi Steve, I don’t own a home. I don’t plan on working nor do I rely on my 403b for income. My income comes from my pension (through the Public Employee Retirement System) and my social security and can afford the payment plan I am currently on. I didn’t start contributing to my 403b until it was made available through my employer but basically right now I have about what i contributed, although lately it has been showing better growth. Although I am not educated in money matters I have heard that it’s silly to pay high interest (mine average 12-14%) on debt when you have savings (which only averages about 1%). I realize that a 403b is a little different than savings and is why I’m asking. Guess I’m just feeling like it’s there….why not use it? Thanks for any suggestions.

    • Well technically the answer is yes you could. But if we are to make the best educated decision about the cost of cashing out the 403(B) we’d really have to know your tax liability on cashing it out rather than borrowing from it. I wonder how much you have in capital gains in that account that you’d be taxed on.

      One other option would be to continue on your debt reduction strategy but consider something like the free approach. It would give you structure and knowledge about exactly when you would be debt free.

      • Hi Steve, I do have a savings account but it is meager…only $2500. I’ve kind of always had the mindset that I could fund any emergencies with a credit card and most of my debt comes from helping family members with their emergencies or my own.

        • In that case my gut reaction is to continue on your current debt reduction strategy and/or use the free approach to prioritize and snowball your debt repayment.

          Let’s leave the 401(B) alone and use that as an emergency fund for big unexpected expenses.

          Does that sound like a reasonable approach?

          I’d just hate to chase sudden debt elimination and leave you otherwise exposed.

          • That was kind of my gut instinct too because it would take me longer to re-establish my “safety net.” The plan I did was through the Mint website, and it looks like it uses the same premise as the Ready for Zero. Thanks so much for your advise and input. I feel a lot better and will continue on my quest to be debt free in 2 yrs or less. Love that you offer this advice for free! Thanks again. Karen

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