The Debt Question I Keep Hearing from Washington Public Employees

Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.

There's a question I hear some version of almost every month.

A public employee in their late 50s, usually with 25-30 years of service, tells me they want to retire early. Then they pause and add, "But I still owe $40,000 on my mortgage. Should I just keep working until it's paid off?"

The specifics change. Sometimes it's a teacher. Sometimes it's a firefighter. The loan balance might be $30,000 or $80,000. But the core question is always the same.

And the person asking always looks exhausted.

Here's what strikes me about these conversations. These folks typically have saved very well between their DCP accounts and personal investments. Their pensions will cover most of their basic expenses. But that remaining debt feels like an anchor keeping them from the retirement they've been planning for decades.

I see this pattern constantly with Washington State public employees in their final working years. The debt question
becomes this massive psychological barrier, even when the numbers tell a different story.

The Real Cost of Staying Longer

Let's talk about what "just working a few more years" actually means.

Those aren't abstract years. They're specific mornings, actual weekends, real family moments. They're the years when your body still wants to be active. When your parents might still be around. When retirement doesn't just mean resting, it means living.

But here's the thing I've learned working with public employees. The debt conversation is almost never really about the math.

It's about safety. It's about not wanting to mess up after decades of doing everything right.

What the Numbers Actually Show

Your DRS pension has a specific structure¹. Your benefit is based on your average compensation and years of service. Working extra years to pay off debt might increase your pension slightly, but you need to run the actual calculation.

Oftentimes, the math isn’t the problem. The feeling of carrying debt into retirement is the problem.

When Debt Actually Matters

I'm not going to tell you that debt never matters. That would be ridiculous.

Here's what I look at when a client brings up debt in their final working years.

The interest rate matters more than the balance. A $30,000 car loan at 7% interest is  very different than a $200,000 mortgage at 3.5%. One is actively draining your resources. The other is barely keeping pace with inflation.

The payment matters more than the total. Can your projected retirement income (pension plus Social Security plus portfolio withdrawals) comfortably cover your monthly obligations? That's the question. Not whether you could theoretically pay everything off before you retire.

The Strategy
Here's what I've seen work for Washington State employees who want to retire early but have debt.

Compare the guaranteed return. Paying off a 7% car loan is like earning a guaranteed 7% return on that money. That's actually pretty good. Paying off a 3.5% mortgage when your investment accounts might earn 7-8% annually? The math favors keeping the mortgage.

But here's where it gets personal. Some people sleep better with no mortgage payment, even if it's not the optimal financial move. That's a legitimate consideration.

Consider the PEBB healthcare bridge. If you retire before 65, you can continue PEBB coverage2. But you'll be paying the full premium out of pocket. That's another monthly obligation to factor in alongside your debt payments. Don't forget to include it in your retirement budget.

Think about Social Security timing. Most Washington public employees can claim Social Security benefits in addition to their pension. If you retire at 58 but wait until 67 to claim Social Security, you have a nine-year gap to plan for.

The Question You Should Actually Be Asking

Not "Should I pay off my debt before I retire?"

The better question is "Can I afford my debt payments in retirement?"

If the answer is yes, and if keeping that debt allows you to retire years earlier than you would otherwise, then the debt isn't your enemy. It's just a monthly expense like any other.

If the answer is no, then you need a different plan. Maybe that's working longer. Maybe that's refinancing. Maybe that's downsizing to a smaller house. But at least you're solving the actual problem instead of just feeling anxious about debt in the abstract.

I think about the public employees I've worked with who've faced this question. The ones who ran their numbers, made a plan, and decided to retire with manageable debt often tell me later how relieved they are that they didn't wait.

They talk about finally having time for the things they'd been putting off. Backpacking trips they'd been planning for years. More time with aging parents. Volunteering for causes they care about.

That's what this is really about. The debt is just numbers on paper. Your life is the thing that's actually happening.

Sources
1. Washington State Department of Retirement Systems. "PERS Plan 2 Member Handbook." https://www.drs.wa.gov/plan/pers2/
​2. Washington State Health Care Authority. "PEBB Continuation Coverage." https://www.hca.wa.gov/employee-retiree-benefits/retirees

-Seth Deal