As you approach your final years in the workforce, one of the things that rises in priority is making plans for life after work. You aim to build up your retirement funds, make smart investment decisions, and think of new life goals after exiting the world of work. However, what about any outstanding debt? Getting rid of debt is a key part of planning your retirement yet carrying debt in retirement is becoming a sad reality for today’s seniors. Approximately 49.8 percent of households headed by Americans 75 years and older have debt. In order to have the best quality of life post-retirement, getting control of your financial obligations is key, which makes paying off remaining bills before the age 65 even more important. So, what can you do to eliminate debt in the homestretch to retirement? Read on to find out…
Make Budgeting A Priority Immediately Pre-Retirement
Budgeting is a powerful financial tool, regardless of your stage in life. When approaching retirement, look for additional ways to save or earn more cash. Cutting out unnecessary expenses is a good way to do this. For some, this will be a nice addition to their nest egg and for others, it can be used to increase debt repayments those last few years. Whether it is your credit card or mortgage, a common suggestion for people looking to repay debt faster is always to increase their payment amounts. Budgeting makes way for savings in your home and lifestyle. These savings are then used to increase your payments.
Change Your Lifestyle with Your Life Stages
Amending your lifestyle as you age is not only beneficial for your health but also for your wallet. One-third of Americans choose to dine out with 49 percent of younger Americans being apart of this statistic. This adds up to as much as $4,249 every year. Simple changes such as reducing your dining out bill can save you thousands and stop you from reaching for your credit card. With your income being fixed in retirement, changing your spending habits will become an important part of the puzzle.
You may want to open a dedicated checking account for your savings. A separate current account will help you stick to both your change in lifestyle and budgeting aspirations. If you have had poor savings in the past five years, you may find that credit reports and schemes such as Telecheck and Chexsystems reflect your individual history to banks. Make use of credit verification and reporting tools to gauge the likelihood of acceptance. If like most consumers aged 55-64 you have debt remaining at this age, the thousands of dollars saved here can be rechanneled and help you become debt free faster.
Consider Your Housing Situation
In the younger years, families tend to upgrade their homes as they grow. However, as we near retirement, most of our kids head off to college or out of the home. This presents the perfect opportunity to downsize or move to a cheaper area. Features such as living close to school districts and child-friendly amenities are no longer a priority. Downsizing frees up cash and equity you would have built up over the years. This extra cash can then be used to intensify your debt repayment efforts as you near retirement. As a bonus, a smaller home is cheaper to maintain; fitting in with the cost-saving lifestyle needed to remain debt free.
Address Long Term Care Options
Life and long term care insurance is a must if you are to avoid debt. The cost of healthcare for a couple in retirement was revealed to be at least $280,000 in a study by Fidelity. This means that without life and care insurance you could be left paying out of pocket. In 2014, 20 percent of Americans were carrying some form of medical debt. Most of them had been forced to use their credit cards; a high-interest option. The longer the debt remains, the more interest accrues and with a fixed income, repayment suddenly becomes more difficult.
Retirement planning is more than simply saving for life after working. To have the best quality of life in retirement, one must address all of their finances; debt included. These simple tips are all quick and simple to execute. If in need of further clarification seek the advice of a financial planner and start your journey to a debt-free retirement today.