Retirement With Debt

Debt and Retirement

Retirement in itself is more difficult to achieve than it used to be, thanks mostly to longevity. Though people living longer is of course a good thing, social security and retirement plans just don’t always provide lifelong income for people who live well into their 80s and 90s. One of the biggest contributing factors to theretirement-debts declining reliability of retirement is debt.

Of course, debt is often times inevitable and sometimes unavoidable. An ideal situation would be to retire with no debt at all, but that has proven to be more and more difficult as time goes on. Can you live with debt as a retiree? It depends. What’s more important, if you can control it, is to try and eliminate your debt before you head into retirement so you stand a better chance of living comfortably without having to work.

Why Pay Off Your Debt? 

The biggest reason you should pay off your debt is because when it comes to retirement, you’re generally going to be making less money than you did when you were working. Because of this, any debt that might have been manageable while you were working could no longer become as manageable during retirement.

Another important reason to pay off your debt before retirement is the fluctuation of interest rates on things like mortgages. Because retirees are generally on a fixed income, it can be extremely difficult to keep up with interest rates when they fluctuate and increase.

The statistics relating to debt among retirees is pretty alarming, too — a recent study showed that one in five retirees had a mortgage that competed with their basic living expenses, and one in four retirees carried a significant amount of credit card debt.

Scarily enough, just 16 percent of retirees said they built a sufficient nest egg for themselves and their retirement. These numbers are enough to scare anyone, but if you can pay off your debt you’ll find yourself working towards a much better financial position for retirement.

How To Turn It Around 

There are several ways to minimize your debt and set yourself up for a safer retirement. One fairly common approach is to get a reverse mortgage. Reverse mortgages are often used to eliminate non-mortgage debt, mostly because they don’t involve monthly payments against the balance. The requirements for reverse mortgages are different than regular mortgages, which makes them particularly tailored towards retirees because of their fixed incomes.

Another way to turn your financial woes around during retirement is something that’s not exactly ideal for most retirees — getting a part-time or full-time job. Getting a job is a good way to pay down your debt while preserving your retirement savings and fixed income. If you use the income from your job solely for paying down debt, you can live off your retirement income and stand a chance of getting out from under the debt relatively quickly.

Additionally, refinancing your mortgage can help pay down debt because it gives you access to your home’s equity.

Pay It Off, Live Comfortably 

If you can keep your debt low and pay it off in a timely manner using whichever method is best for you, living comfortably in retirement isn’t an unrealistic goal. Although retirement is a much harder thing to achieve now than it was years ago, given the economic climate and increased life longevity of retirees, it might not be so difficult if you can get a hold on your debt and ultimately allow yourself to live well on a fixed income.  Learning priorities really help in this area.

 

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