hi and questions

pyledenver · Post by **pyledenver** » Thu Mar 14, 2013 10:02 pm

I'm almost 52 and can retire with a defined benefit pension of $25,000/yr, fixed. The state covers retiree medical premiums if one's single. I rent an apartment. On the downside, I have a large amount of credit card debt. I can downsize to the point of carrying the debt after retiring, repaying it more slowly than as a working stiff. Should I hold off retiring until the debt's settled, or take the leap?

George the original one · Thu Mar 14, 2013 11:46 pm

No debt when you retire! Especially no credit card debt, which is high interest and is not forgiven in bankruptcy. Pay it off ASAP.
If we have '70s-'80s inflation, that $25k fixed income will be the equivalent of $13k in a decade. Are you really sure you can handle living on that low of an income?
Less drastic scenario is this past decade's inflation... can you handle living on an income that's the equivalent of $20k?
In other words, what measures are you taking to protect yourself from inflation? (And I hope the answer is something other than social security...)

JoeNCA · Post by **JoeNCA** » Fri Mar 15, 2013 12:49 am

I agree with George entirely, not only should you not have any debt, you should have decent savings before retiring.
Average gross income in US a few years ago was about 50k/year. Where I am (Northern California), 50k/year is just getting by, and that's not factoring in inflation.
52 just before retirement sounds about perfect for ERE IMHO.

secretwealth · Post by **secretwealth** » Fri Mar 15, 2013 1:45 am

Credit card debt isn't discharged in bankruptcy? This is new to me--did they change the law?

RealPerson · Post by **RealPerson** » Fri Mar 15, 2013 1:57 am

Credit card debt is usually discharged in bankruptcy. Exceptions are basically cases of fraud. For example, if you use your credit card heavily just before filing for Chapter 7. Chapter 13 may be a better choice in such a case, but you probably face repaying some credit card debt in the repayment plan. GOO may be confusing with student loans.

RealPerson · Post by **RealPerson** » Fri Mar 15, 2013 1:59 am

Otherwise, I agree with previous posters. There is no way I would take ERE with ANY credit card debt on the books.

George the original one · Fri Mar 15, 2013 2:00 am

http://en.wikipedia.org/wiki/Credit_CARD_Act_of_2009

m741 · Post by **m741** » Fri Mar 15, 2013 3:02 am

I'll echo the others here. Pay off the credit card debt ASAP. It's the best investment you can make.

secretwealth · Post by **secretwealth** » Fri Mar 15, 2013 3:40 am

@George: Can you show me where in that act it says cc debt can't be discharged in bankruptcy? I glanced briefly at the law itself (http://www.gpo.gov/fdsys/pkg/BILLS-111h ... 627enr.pdf) but, man, life is too short to read 32 pages of legislation.

George the original one · Fri Mar 15, 2013 3:58 am

http://thacklaw.com/40-credit-card-bank ... ection-act
I thought it was part of the CARD act, but it looks like it was earlier legislation.

secretwealth · Post by **secretwealth** » Fri Mar 15, 2013 4:18 am

Thanks, George--that was pretty depressing to read.

Dragline · Post by **Dragline** » Fri Mar 15, 2013 4:38 am

CC debt is dischargable, but you have to go with Chapter 7, not Chapter 13. Here's an explanation of the basic differences: http://credit.about.com/od/debtmanageme ... ytypes.htm
You really need to consult a lawyer on that sort of stuff.
But I agree that that bad boy needs to be paid off. Another option would be to retire from that job and take a different one, assuming you are allowed to take the pension at the same time. This is a common strategy for military people and police, but others use it too.

Chad · Post by **Chad** » Fri Mar 15, 2013 12:07 pm

I agree with everyone else. You have to be debt free and have at least some savings to even consider retiring with that pension. In all honesty, the debt you are carrying proves you don't live a $20k a year lifestyle, so no proof you can live like that in retirement. Don't despair, you can make significant changes to both debt and savings in a few short years if you put effort into it.

RealPerson · Post by **RealPerson** » Fri Mar 15, 2013 2:29 pm

-GOO - I learned something about credit card debt. Thanks for the info. My relative ignorance in this arena is the price to pay for never carrying any credit card debt. Without carrying a CC balance, you don't really have to think about what happens to it in bankruptcy.
I agree with Chad. The credit card debt not only shows that you are not ready for ERE, but more importantly, your current lifestyle is not compatible with ERE. All is not lost, though. Many journals here show how quickly you can turn that around. All it takes is willingness and motivation.

frugaladventurer · Post by **frugaladventurer** » Fri Mar 15, 2013 5:31 pm

Yes, I agree - get rid of the debt!

How much do you owe? And what is your income now?
Also - what is your motivation to retire now? If you are sick of your current job, could you draw the pension and work at another, new, less stressful job?
Will you also collect Social Security when the time comes? Or is this pension the only source?

frugaladventurer · Post by **frugaladventurer** » Fri Mar 15, 2013 6:30 pm

Also - does the pension increase if you work longer? By how much? We are assuming when you say "fixed" that there's no cost-of-living increases, correct?

Seneca · Post by **Seneca** » Fri Mar 15, 2013 6:44 pm

I guess I'll be like the 10th to say no way on retiring with CC debt, unless you have truly extraordinary circumstances. Hating your job definitely wouldn't count.
More than that, what I worry about for you is your financial plan to now has led you to having CC debt. Which means, your plan sucked aka "normal".
To retire happily on $25k you need to be able to do the things you need & want to do for less so you have some margin in your life. If you have a couple of years living happily consuming less than your retirement income, then I think you're ready.

pyledenver · Post by **pyledenver** » Mon Mar 18, 2013 5:52 pm

Thanks for the input. I'm hanging on til I'm debt free.