During the retirement stage of your life, you need an assessment of the status of your household finances to review any debt or liabilities that threaten the integrity of the estate. Debt never has to halt the progress you have with your retirement plans; it is important to draw up plans and get your house in order regarding overhanging debts before retirement. Income helps determine options at hand to sort out the debts. Therefore, debt management is a valuable tool to have regarding retirement planning.
Types of Debt
Credit card debt–Consumers over fifty are most likely to have credit card debt. However, nearing retirement with credit card debt does not mean your situation cannot be fixed. The more money put toward paying off your credit card debt, the better. Negotiating a lower interest rate or contemplating a balance transfer credit card at low interest to help you pay off your debt more quickly and save money on interest is also worth looking into.
Mortgage debt–Even though we consider this type of debt a positive one, it is a debt that requires careful planning against pre-retirement. We recommend refinancing at a lower interest rate if you want to carry this debt for a few years into retirement.
Student loans–Many parents borrow to help further the education of their offspring. This debt, however, can linger going into the future. Even though you consider this type of debt a promising investment because of the high-paying job opportunities, it can cause long-term financial problems for your family. We can never truly discharge these loans through bankruptcy. Requesting for your child to take over the debt post-earning advisable to manage costs.
Managing Debt Payments in Retirement
Questions you need to ask yourself include your ability to manage payments, your ability to refinance at lower interest rates, and bad debts you might hold, e.g., credit balances.
You must do this while also considering:
1. How much retirement income do you expect to come to? Both your and your spouse’s pensions and post-retirement benefits are to be considered.
2. How many payments do you make monthly to solve debts? This includes a car, mortgage, credit card, and other financial obligations.
Similar Article: How to Develop Financial Discipline for Retirement Success
Conclusion
Many people possess a lower income in retirement than they had while working; The rule of thumb in financial planning is that retirees should plan to live on 80% of their pre-retirement income. If you still can’t manage your debt payments on that budget, you may need to adjust your retirement plan or delay retirement until you sort some of your debts out.
