How to Pay Off Debt in Retirement
Financial advisors suggest that you eliminate debt before you retire, when you’re drawing a regular paycheck and when you’re typically at the height of your earning capacity. However, that’s not always possible. If you’ve already retired and are in debt, you may see a happy retirement as a pipe dream. Your situation may be worrisome, but it is far from impossible to resolve. Here are some basics as to how to get out of debt, even if you’ve already retired.
Know What You Owe
The best way to attack the problem is to begin by listing exactly what you owe. Create a spreadsheet to show each credit account, the total amount of the debt, the required monthly payments, and the interest rates. This helps you know which debts you should tackle first.
Make a Plan
Create a budget that you can live with and include an entry in there for additional debt reduction. This would be an amount over and above the minimum payments for your accounts.
Pay off the Higher Interest Rates
Credit card rates are usually the highest you’ll have to deal with. Pick the one with the highest interest rate and work on that one first. When you’ve paid that one off, use the money you had been applying to that card to add to the payments on the next one. Continue this process until those high rate cards are paid in full, and don’t use them again unless you can afford to pay them off every month.
After the credit cards are gone, work on any installment payments you may have for cars or other purchases, as these rates are usually lower than the credit cards. Since your mortgage is a secured loan on an appreciating asset, you don’t necessarily have to pay that one off, especially if you’re receiving a tax benefit by keeping the mortgage.
Go Back to Work
If returning to the workplace is an option, you can funnel that money into retiring your debts. More Americans than ever are working in their late 60’s and into their 70’s.
Don’t Use Your Retirement Savings
If you begin to chip away at your retirement savings to pay off debts, you may not have that money later when you need it most.
Downsize
This may be the time for you to sell your home and move to a smaller less expensive space. Downsizing may also force you to sell items you no longer need. Trading artwork, furniture, and other household goods for extra cash is a great way to reduce your debt load.
Be Careful of Quick Solutions
You’ve probably heard advertisements for debt consolidation, refinancing, or reverse mortgages. While these are not always a bad idea, you should get some advice from a trusted source before you go in that direction.
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Apex
10000 Cambridge Village Loop
919-249-7612
Brier Creek
7901 TW Alexander Drive
Raleigh, NC 919-737-7000
Wilmington
75 Cavalier Drive
Wilmington, NC 910-756-4189