Liz Weston: Liquidating too much of nest egg could leave you short on retirement funds

Dear Liz: We had a plan to make our retirement savings last until our mid- to late 80s.

Now we have unanticipated house repairs that could amount to tens of thousands of dollars.

Should we draw down our retirement savings and pay the associated taxes at a 22% rate, or take out a home equity loan, or some combination of that? Or are there other ideas?

Answer: Obviously, money that you spend can’t generate future returns to help fund your retirement. Liquidate too much of your nest egg, and you could find yourself short of funds long before your retirement ends.

But loans require paying interest, increasing your living costs and causing you to draw down your retirement funds faster than intended. Which is the better option depends on the details of your situation. A fee-only financial advisor or accredited financial counselor could give you personalized advice.

They will also be able to discuss additional options. A reverse mortgage could allow you to tap your home equity without having to repay the loan until you move out, sell the home or die. Or maybe it’s time to sell the house and move to a lower-maintenance living situation, such as a condo or retirement community. There’s no one-size-fits-all solution, but discussing the possibilities will help you clarify which is the best approach for you.

Dear Liz: I paid off my high-interest credit cards. Should I close the accounts or leave them open? I heard a long time ago that closing the accounts will affect my credit score because less credit is available to me. But I don’t want to use these credit cards anymore because they have a high interest rate.

Answer: A card’s interest rate is irrelevant if you pay off your balances in full each month, which is the best way to use credit cards.

Closing a bunch of your credit cards at once can have a negative impact on your credit scores. That’s why the general advice is to leave cards open if possible, making a small charge once in a while so the issuer doesn’t close them.

If you can’t trust yourself to use the cards responsibly, though, closing them may be the best option. Or you can ask the issuers for a “product change” to a lower interest card.

Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.