Editorial Policy

Preparing your credit for retirement

Erica Sandberg

May 26, 2015

QHi Erica,

My wife and I both have pretty good jobs, and the kids are out of the house, so that's an expense we don't have to worry about! We only owe on the house, and we have three credit cards between us. We plan to retire in about five years, and we're wondering if we should plan our credit as well as our retirement! Will it be harder to get a loan for a car or to get a credit card once we don't have our salaries? Should we take care of those things before we retire? Sal

ADear Sal,

You receive the planner of the year award from me! I admire you for thinking ahead like this, and based on what you wrote, it appears that your financial affairs are well within the safety zone. However, I'm happy to guide you to even greater security.

Once you retire, as long as you've had a lengthy history of managing your financial obligations responsibly and are receiving compensation that acts like income, lenders will see you for what you are: great customers.

The money you might receive from such sources as Social Security, investment dividends, pensions and retirement plans are all considered. Lenders just want to be confident that you can easily repay any debt you might get into. And that should be as much a concern for you and your wife as it is for them! In fact, it will be vital, because when you stop working, you'll be living on a fixed income.Ask Erica

With three credit cards, you and your wife might have sufficient accessible borrowing power to meet your combined needs, now and into the future. To be sure, find out what the credit line is for each account. You can find that information on your statement, both the online and paper versions.

Question whether it's enough for your impending lifestyle. That will require some projection, of course, but consider it a perfect opportunity to dream and plan.

For example, you may find that the grand total of what you can charge now is $5,000. If you think you may be embarking on a round-the-world cruise or some other grand adventure, $5,000 may be insufficient. You may not need to get another card to augment it, though, If your history with these issuers is positive, ask for a credit increase. If they agree, it may close the gap, and you can be on your way. If not, you may want to get another account or two. Just don't overdo it.

Everyone is different, but in general, a couple of cards per person should be enough. Only apply for cards that match your credit score, and don't apply for multiple cards at once. It can ding your score. Obtain your credit scores from MyFICO.com (they're about $20 per credit report), then browse this site for the credit cards that are available in your scoring category.

If you want to buy a new car with the help of a loan once you retire, great! Your scores will come in handy when you want to take out a car loan, as you'll know if you're eligible for those with the lowest interest rates.

After that, keep your debt to a minimum, get those payments in on time, and you and your wife should be fully prepared for whatever this next chapter in your life holds. Enjoy!

Got a question for Erica? Send her an email.