How to Prevent Carrying Debt in Retirement?
There’s no denying that the baby boom generation has left a lasting impact on the world. This generation has spent the last several decades as the leaders of almost every industry, and continue to play major roles in politics, entertainment, science, agriculture, medicine and pretty much any other market you can think of.
But as this decade rolls on, millions of boomers are getting ready for retirement. Whether you can’t wait to hang up your work clothes and sail off into the sunset or you feel like they’ll have to drag you away from your work kicking and screaming, there’s no stopping Father Time. So now you’ve got to focus on how the rest of your life will play out, and you obviously want it to be as comfortable as possible.
Planning in advance to manage debt in retirement
As you enter retirement money becomes a larger issue, and keeping expenses down is a crucial step. You’ve got to get rid of debt to make sure that the money you do have coming in isn’t used up without contributing to your life.
Here are a few ideas to help boomers prevent carrying debt into retirement.
Credit card debt
First of all, you have to get rid of any credit card debt. This is something that can take some serious time, depending on the size of your debts. So you should look to put together a plan several years before retirement to make sure it is possible. Start out by setting a deadline for your credit cards to be paid off, and then come up with a monthly payment that gets it done. It will be more than worth it to sacrifice a few creature comforts now if it insures you don’t enter retirement with credit card debt hanging over your head.
A new car
If you’re going to have to get a new car soon, you could consider renting instead of buying depending on what suits your circumstances better. As you get closer to retirement, buying a car makes less and less sense for some people. Weigh up whether you are better paying the large purchase price or monthly financing payments just to end up with a vehicle you are responsible for repairing? Could a lease be a better bet? The monthly payment and money you have to put down are both lower, and you don’t have to worry about repairs. You get to drive a safe, new car every two or three years. It doesn’t appeal to me but many other people find it is the best option for them.
Now you’ve got to turn your attention to your mortgage. You’ve spent your whole life working in order to end up with that home, which is also your investment. But if you’re still making mortgage payments it’s time to consider the situation carefully. Once you get closer to retirement, your needs change. It may be worth it to liquidate some investments if it helps you pay off your debts. Your living expenses will be reduced significantly, leaving you with more money to reinvest later.
If you’ve carried an insurance policy to protect children that are now grown and working themselves, you can probably cash that in without worry. Perhaps you have some additional investment set aside that can be used. But if your mortgage is worrying you, do whatever you must to get that mortgage paid off. Of course with the current very low interest rates on mortgages you may decide to leave money that is earning good interest and keep paying the low cost mortgage. Again, you have to do what is right for you.
Get professional advice
Because everyone’s financial and life situation is different it is important that you get solid personal advice from some professional who is an expert in the area of planning for your retirement. This is especially important if you will be carrying debt in retirement. Meanwhile ASIC’s Money Smart website has a good retirement calculator that might be useful to you.
I can’t recommend anyone but am hoping soon to interview some people and get their general advice for our readers. Let me know if there is someone you’d recommend who is a very professional financial planner getting good results for their clients…at reasonable cost.
Get your free retirement planning guide
Did you already get your copy of our FREE Retirement Planning Guide called Create a Future You Will Love? Now is the time to plan for the next phase of your life. The better you plan the better the outcome and so you can spend your retirement doing what you love to do and living the retirement lifestyle that you want. Download it now!