Credit card debt can be crippling — especially with the average interest rate sitting at 21.76%.

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So, what happens if you’re retired and saddled with $75,000 in credit card debt? You may find it tempting to dip into your retirement nest egg or take out a home equity line of credit (HELOC) to help bail you out — but there are significant downsides to both of these approaches.

If you find yourself in a similar situation, there are some pros and cons to consider first.

Raiding your retirement fund could cause problems

Dipping into your retirement savings may seem like a quick solution to your credit card woes.

However, your nest egg is a vital financial lifeline that will help carry you through your golden years. After all, Social Security benefits alone won’t be enough to live on.

On average, Social Security benefits replaces around 40% of your annual pre-retirement earnings. It’s meant to bolster existing savings and pensions — not be the sole source of income.

Some finance experts actually advise only withdrawing 4% of your account balance during the first year of retirement and then adjusting the dollar amount for inflation for the following years. This will help your savings last. But if you take $75,000 out of your account in a lump sum, you'll break this helpful retirement hack.

Not only are you going to lose the $75,000 you’d invested, but also all the potential gains that money could have made for you throughout retirement.

You'll also likely have to reduce your annual income by around $3,000 (based on 4% of $75,000) for the rest of retirement if you shrink your savings to pay off debt. You also run the risk of running short of money while you're still relying on savings.

Arguably, the upside is that you would avoid credit card interest with this approach, and wouldn’t have to commit to yet another monthly payment plan you’d have to deal with for years to come.

Read more: Cost-of-living in America is still out of control — use these 3 'real assets' to protect your wealth today, no matter what the US Fed does or says

Taking out a HELOC isn't ideal, either

Borrowing against the equity in your home may seem like a good option since the interest rate is usually well below what you'd pay on a credit card.

Average national home equity loan rates are around 8.36% as of Oct. 15, 2024, which is significantly cheaper than credit card interest.

In addition, if you have multiple credit cards, using one home equity loan to pay them all off could simplify things for you.

However, there are some major downsides. For one thing, home equity loans come with high closing costs that range between 2% to 5% of the total loan. If you don't have this money, you'd need to borrow it.

You also need to have equity in your home, which means that the property has to be worth more than you currently owe on it if you still have a mortgage.

Most lenders won't give you a loan for more than 80% to 90% of your home's value (minus what you owe on it), so you'd have to make sure you could even actually borrow $75,000.

You'd likely be left with high monthly payments, too. Let's say you borrowed $77,250 to pay off your credit cards and cover 3% closing costs on your home equity loan at the average 8.37% rate. If you took out a 10-year loan, for example, your monthly payments would be $952.43 per month. That's a significant chunk of money.

The biggest problem, however, is that you are putting your home on the line. Your lender could foreclose if you don't pay. Are you confident you’d be able to pay $952 a month until you're, say, 81?

If you've drained your equity, you won't be able to sell unless you can make enough to pay off that new loan, so if you can't make payments you'll have few options left.

What should you do instead?

If you find yourself in this situation, neither option may be the right approach. Instead, you should consider talking to your creditors about a payment plan or even consider filing for bankruptcy.

Both your primary home and retirement savings are typically protected, so creditors can't come after you for much unless you have a lot of other assets.

If you’re 71, for example, having great credit may not matter much at this stage of life, so while your score will take a hit, that may not be as bad as ending up with zero retirement funds or no home.

If you do have other assets, of course, then those options may not work — but a personal loan may be a better way to consolidate your credit cards as rates aren't that much higher than home equity loans, the fees are lower, and your house isn't used as collateral.

Ultimately, you'll need to consider the details of your financial situation — but don't jump into jeopardizing your most important retirement assets out of an understandable desire to be done with your credit card debt for good.

If you’re still unsure, consider talking to a trusted financial adviser to help you map out a plan for tackling that debt.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.