Q: Retirement jitters:
Rates are rising, should I be
worried about my debt?

It’s worth noting that some kinds of debt are better than others. Everything else being equal, having a mortgage on a home that rises steadily in value is preferable to credit card debt, which often comes with double-digit interest rates that may negate any returns you are making on your savings elsewhere.

Next, if you have a sound retirement plan, higher mortgage payments on your home should not cause you to lose sleep. Sure, rate hikes may make people uncomfortable since we’ve been living in a low-interest-rate environment for a long time, but rising rates are part of a normal economic cycle. A flexible plan should be able to weather different types of circumstances because we know events never stay the same. Rates rise and fall. Stock markets rally and correct. Tax laws change to your benefit and to your detriment. The same goes with your personal situation: You can get a better-paying job. You can get a bonus or an inheritance. Or you can become unemployed temporarily. You might even take on other, unlooked-for expenses, such as financing your parents’ healthcare costs. Your retirement plan, which would often include a range for your mortgage obligations and a cushion for all eventualities, can take all this into consideration.

So when rates rise, it may cause a slight hiccup in your larger plans and some tightening in your discretionary spending, but it shouldn’t cause turmoil. And rising rates shouldn’t cause a chain reaction that impacts your retirement plans, your ability to pay off credit cards or to help your adult kids.

If you’re planning on retiring soon, but are now anxious because of recent events, that says to me that your plans may need to be adjusted. You don’t know what you don’t know. It’s likely time to revisit it.

I recently had clients — well on the way to a comfortable retirement — who were in a conundrum about getting their floors refinished. They didn’t know if they could afford it because they hadn’t revisited their retirement plan for a bit and had no base to make a judgement over this somewhat inconsequential expense. They didn’t know their situation — of course they could afford it!

If rising rates have been the catalyst to revisit your retirement plans, that’s not a bad thing. The grand solution is to check in with a financial planner or advisor to take stock of your actual situation instead of worrying about “what ifs.” In fact, the closer you get to retirement, the more often you should be checking in. An advisor can run scenarios to see if you are really on the path for the retirement you want, and if not, they can suggest strategies to help get back on track.