Retirement is generally a joyful milestone—a well-deserved period of rest after a lifetime of working hard. For many, it is a time to spend time with family members, pursue hobbies and travel. But getting the most out of retirement—and experiencing a high quality of life throughout—depends on having the funds to pay for what you need and want.
Your cost of living will depend on a number of factors: Your lifestyle, location, health, etc. One rule of thumb states that living comfortably will require about 70 to 90 percent of your previous monthly income. The average household headed by someone over the age of 65 spends $45,756 annually, according to NerdWallet. Yes, that is less than younger households, but not incredibly so. Although you will no longer be commuting or raising children, categories like housing, medical care, food and miscellaneous expenses still exist for retirees.
The Danger Of Debt During Retirement
What is the biggest danger of carrying debt into retirement? As one retirement expert puts it, “Many retirees are in a precarious situation if they are confronted with any kind of financial shock.” And, according to one survey from the Tennessee Consolidated Retirement System, retirees in debt owed a median of $52,000 in mortgage debt and $4,000 in non-mortgage debt.
Perhaps the most difficult thing about dealing with debt is that the longer it takes to pay it off, the more chance it has to grow. Even making minimum payments on your balances doesn’t stop interest from accruing, meaning you’re paying more money to pay off the same original amount over time—oftentimes much more. It’s easy to see how this cycle could spiral out of control, causing considerable stress and inconvenience during your golden years.
So, what can consumers do to pay off most or all of their debt before retirement?
Debt Elimination Strategies To Consider
Just like there’s no one-size-fits-all retirement plan, there’s no blanket strategy that works for everyone when it comes to getting rid of debt. With that being said, there are a number of debt relief options to explore. Here are a few to consider:
- Debt Consolidation: Pay off multiple high-interest debts by taking out a personal loan; then repay that loan over time. Success depends on repaying the loan in full, on time, and getting a favorable interest rate.
- Debt Settlement: Consumers who enroll in a reputable program will deposit money into a special account until they’ve saved enough to negotiate with creditors. Trained negotiators reach out and attempt to settle favorably on behalf of enrollees. As many Freedom Debt Relief reviews point out, consumers often appreciate having a partner in debt resolution. This solution is best for serious debt exceeding $7,500.
- Credit Counseling: Work with a counselor to come up with a realistic repayment plan, and potentially even get lower interest rates along the way. This solution tends to be best for people who can handle paying more than the minimums due on their balances.
- Do-It-Yourself: Adjust your lifestyle and use the savings to prioritize debt repayment, either starting with your smallest balance—called “snowballing”—or your balance with the highest interest rate—called “avalanching.” Whichever way you choose to approach DIY debt repayment, rank your debts in order so you can methodically work through this debt list.
Paying off debt before retirement will allow you to enjoy these years to the fullest. You’ll also be better equipped to weather bumps in the road—like unforeseen travel or medical costs—if you’re free from the burden of debt. Your future self will thank your current self for getting started on debt elimination today.
I hope you enjoyed this blog post about why you need to pay off debt before retirement and the best ways to eliminate debts.
Interested in more articles about retirement and debt reduction?
Read Related Resources:
• How To Make The Most Of Retired Life Personally & Financially
• What You Need To Know About Debt Consolidation
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