Welcome back to “Ask an Advisor,” the advice column where real financial professionals answer questions from real people. The topic can be anything in the world of finance, from retirement to taxes to wealth management — or even advice on advising.
Credit card debt is a pernicious problem in the United States. In the first quarter of 2024, Americans owed a total of $1.12 trillion on their credit cards, according to the Federal Reserve — a 13% increase from the year before. And almost 9% of those debts slid into delinquency.
Another major challenge is saving for retirement. Americans believe it would take about $1.5 million to comfortably retire, researchers at Northwestern Mutual found — but the average American only has about $88,400 saved up. And according to a study by GoBankingRates, 28% of Americans have no retirement savings at all.
So when both these problems combine in one person’s finances, it’s no wonder they’d reach out to experts for help. A retiree in New York is facing a double whammy: Her retirement savings are limited, and she’s deep in credit card debt. She could pay off her debts right away, but that would deplete her savings. Or she could pay them off slowly, but then she’d face today’s interest rates — which are at historic highs.
READ MORE: Americans’ top 5 financial regrets — and how to avoid them
What should she do? For answers, she turned to financial advisors. Here’s what she wrote:
Dear advisors,
Is it ever OK — or even beneficial — to carry a little bit of credit card debt?
I’m a retiree in New York City, and I don’t have a lot of income. I have a small pension, which, combined with Social Security, provides enough for food and rent. In addition, I have about $100,000 in savings.
I also have about $14,000 in credit card debt. I could feasibly pay this all off in one sum, but I might rather whittle it down slowly — perhaps paying the required minimum each month, or a bit more — so I don’t severely diminish my savings right away. Does that make financial sense, or am I missing something?
Sincerely,
Mired in Manhattan
And here’s what advisors wrote back:
