None of us enjoy owing money, but debt can eventually become a big problem when we reach retirement. Once you retire, you may live on a fixed income. That alone can cause some strain on your budget, and high credit card payments can make things much worse.
A recent report by the Employee Benefits Research Institute revealed that Americans aged 55 to 64 carry the heaviest debt burden. In these households, the average total debt amounted to $107,060 in 2010. We think of this age group as “pre-retirees”; yet, those who should be getting out of debt are actually the ones carrying the heaviest load!
It’s no wonder so many Baby Boomers say they are worried about their retirement savings and budgets. After all, they are expected to live 20 or more years after retirement. A large amount of debt would keep anyone up at night, but it’s especially worrisome when you’re facing 20 or more years of life on a fixed income.
If you’re one of these worried Baby Boomers, you may already know that paying off your debts before retirement is the wise course of action. It goes without saying that you should cut back on expenses and stop using credit cards, but what else can you do? A debt consolidation program can help you roll all of your monthly, high-interest payments into one (in most cases) lower-interest loan. If you can avoid having a mortgage in retirement, this is another good idea. You may be planning to downsize to a smaller home once you retire; if you do it now, you can put that extra money toward credit card payments each month.
But what if you’re still facing some pretty hefty debt? It can be a difficult choice, but in most cases it is better to work a few more years and pay down that debt before you retire. It’s almost always better to retire later than you had expected, than to suffer the ill effects of high debt for the rest of your life.
Talk to your financial advisor about your debt load and expected retirement income, and plan for a carefree retirement.
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