Debt and Retirement: Can You Handle Both?

Keystone Financial Group |

Saving enough for retirement while carrying and paying off debts can be an uphill battle. For some pre-retirees, debt repayment is the primary focus over savings, leading them to delay or reduce their retirement lifestyle. But if you’ve been struggling to save, it’s never too late (or early) to take steps to get back on track.

Mortgage or Retirement First?

The days of mortgage-burning parties are a thing of the past. It’s estimated that almost 10 million homeowners aged 65 and older are still paying off their mortgages.

Whether or not it’s better to pay down your mortgage as soon as possible depends on your personal circumstances. A financial professional can offer guidance based on your situation. Generally, if you plan to sell your home and downsize to a more affordable living space in retirement, it's not necessarily wise to lock up extra money in your home. (Watch the Mortgage Mastery video here to learn why.) On the other hand, if you plan to stay in your home forever, it could be a good idea to pay off your mortgage before you retire. Consult with a knowledgeable professional who can help you determine what's best for you.

Pay Down Consumer Debt

If, for example, your retirement assets are earning less than 6% a year, even a 9% credit card debt can cost you vital cash flow. This is why it’s important to get serious about credit card debt. With less debt, you’ll be able to put more toward your retirement savings, so the sooner you can start, the better.

  • Set a monthly target for debt repayment and try budgeting around it. Find ways to stretch essential expenditures and eliminate non-essentials if you can.
  • Try decluttering. You may be able to raise more money than you think by selling unwanted or unused stuff in a garage sale or online.
  • Save any excess cash flow. Once you reach your debt repayment goal, consider applying that budgeted payment to your savings.

Get to Work

If you can’t imagine not working for 20 or more years, you may want to join the growing number of retirees that use retirement as an opportunity to transition to a new career. Some choose to work as a contractor for their current employer, scaling back hours and responsibilities. Others choose to branch out and start their own business or monetize a hobby.

Instead of limiting your retirement to a life of leisure, you can use retirement as a way to trade in the work you had to do for the work you want to do. By taking control of your new working life, you may find a work-life balance that sustains you mentally, physically, and financially.

Want to discuss balancing debt and retirement with a holistic financial professional who can help you assess your options and make smarter decisions? Contact our office for a free initial strategy session!



This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2024 Advisor Websites.