suze orman
Photo: Robert Trachtenberg
Q. I'm a retired police officer, 59 years old, and have about $100,000 in a fixed annuity account. I'd like to take out some of that money so I can pay off the $25,000 I owe on my credit card and be debt-free (aside from my home mortgage; I split that $1,688 monthly payment with my husband, who is also retired). Do you approve?

Suze: As a retired police officer, you surely value evidence, so here's mine revealing the holes in your case. First, all earnings withdrawn from an annuity will be taxed as ordinary income. On top of that, the insurance company that runs your annuity may charge a withdrawal fee; this so-called surrender charge can start as high as 7 percent. If you factor these taxes and fees into your calculation, you'll see that you would need to take out more than the already hefty $25,000 to pay off your bill.

Now allow me to switch into (friendly) interrogation mode. If you were to use up a big chunk of your annuity today, would you have enough to live on throughout what is likely to be a very long retirement? According to current statistics, half of all 59-year-old women in this country will be alive at age 84. Say you end up in that 50 percent: Still seem like a good idea to raid your retirement fund so soon?

You conveniently didn't tell me what's to blame for the $25,000 credit card balance. If you don't have a strong handle on your spending and expenses—and please be honest here—then the last thing you want to do is use your annuity to dig yourself out of debt. That kind of quick fix, in the absence of some serious behavioral shifts, will only lead you right back into the habit of acquiring debt.

My advice is to get a part-time job. You're only 59! I respect that you're old enough to retire from the police force, but you're still young to retire from the workforce. Whether the job is consulting, security detail, or out of the law enforcement realm altogether, you should aim to generate at least $1,000 a month in after-tax income—and put all the money toward paying down your credit card. In two or so years, you can have that bill paid off, and your retirement funds will stay intact for what I hope is indeed a very long life.

More Advice on Credit Card Debt

Please note: This is general information and is not intended to be legal advice. You should consult with your own financial advisor before making any major financial decisions, including investments or changes to your portfolio, and a qualified legal professional before executing any legal documents or taking any legal action. Harpo Productions, Inc., OWN: Oprah Winfrey Network, Discovery Communications LLC and their affiliated companies and entities are not responsible for any losses, damages or claims that may result from your financial or legal decisions.

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