Skip to content

Scale Back Your Debts Before You Retire – Don’t Let Debts Mar Your Golden Years

A very common assumption among people is that retirement is equivalent to being debt free. All your credit cards have zero balances, your home mortgage is paid off and you only have a car payment as you’ve got some amazing financing deal from the dealership. When you thought of retiring, a mortgage payments wasn’t certainly a part of the equation. According to recent reports, more and more Americans are stumbling through their final working years and also carrying a heavy debt burden. All those who are hoping for a long and happy retirement usually need to find out a way of lightening the load. Credit card debt, mortgage debt, apart from the financial needs of college-age children and elderly parents are taking a heavy toll on the older retirees and the baby boomers. In fact, nearly half of the baby boomers are expected to retire with debt, as per survey by Fidelity Investments.

Reports suggest that over the past 2 years, there has been a 32% increase in the number of retirees who are seeking help from the members of the Association of Independent Consumer Credit Counseling Agencies (AICCCA). Among them, older people or retired people are the biggest growth area and this is rather a very serious situation as the seniors have health problems and restrained ability to work. The burden of debt is growing intolerable for most of the older generation. People above 55 account for 29% of bankruptcy filers in 2011, which is up from 23% in 2009, according to the Institute for Financial Literacy, a non-profit organization.

Host Of Resources That Can Help You Move Towards Retirement With A Lighter Step

Even if you’re someone who has never struggled to repay credit card bills, you can easily enhance your retirement security by learning to recognize the debt traps that usually tend to scare the retirees. Here are some strategies to adopt.

  1. The overwhelming burden of credit card debt: Whether it’s coping with investment losses or sparing health care costs, seniors usually inevitably reach the same conclusion of using credit cards. Studies reveal that people above 65 have more credit card debt than any other age group and the younger generation has unloaded most of their debt level unlike the seniors. Credit card debt usually leads to bankruptcy and it’s becoming too common among the seniors. When faced with huge credit card bills, always focus on paying down debt that carries the highest interest rate and you can even consider consolidating them through a balance transfer method. Beware of the false promises of the telemarketers.
  2. The pitfalls of carrying mortgage debt post retirement: One of the worthiest goal of retirement is paying off your mortgage before you hit retirement. Keeping in mind the rock-bottom yields on CDs and savings accounts, you’ll likely save more money eliminating your mortgage interest payments rather than tucking away cash in the bank. But the homeowners who are nearing their retirement shouldn’t accelerate their monthly mortgage payments by ignoring their other high interest debt or cutting back on their cushion. A large number of homeowners, over the past few decades have been carrying mortgage debt till their retirement years and if you too are following the herd, you should take help of the professionals who can advise you about repaying your mortgage debt earlier than the scheduled time.
  3. Confronting the financial demands of their children and parents: The present baby boomers are often considered as the “sandwich generation” who are sandwiched between their children and their parents. When you’re faced with the fiscal demands of your elderly parents and your children, even the most scrupulous saver can feel squeezed enough. With the soaring costs of the college tuitions, Americans are actually loading up on their student loan debt in order to help the younger generation complete their school and college. The volume of Federal PLUS loans have skyrocketed and there are some parents who are tapping their 401(k)s to make it possible for the students to complete their education. You may gather knowledge on the different repayment plans through which you can repay your student loan debt.

Even when you’re going through good financial health, you should consider working for a longer period of time in order to avert the possibility of financial strain. Always maintain a solid emergency fund so that you can cover 2 to 3 years’ worth of living expenses. Save at least 10-15% of what you earn, irrespective of the amount you make in a month and also tuck in money to your retirement account. Don’t raid such tax-free accounts as this will subject you to unnecessary penalties.

Author-bio: This article has been put forward by Anjelica Cullin, who is a web enthusiast and a financial writer. She has in-depth knowledge on finance and he contributes his articles to different websites and blogs that have the predominant theme of finance. She is alos associated with a debt consolidation community you can visit this debt community on facebook

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.