When most people think about retirement the image that comes to mind is one of financial security, flexibility and freedom. One part of this equation is having a large enough nest egg to pay for your lifestyle and expenses during retirement. The other part of the equation, of course, is to have minimized those expenses to the greatest extent possible.
A big part of reducing expenses is making sure you don’t have to service a large amount of debt while you’re living off your retirement nest egg. If you can retire without any debt, you’ll find yourself in a much stronger overall financial position.
Here is some retirement advice for improving your odds for being able to retire debt free.
Make a Plan. Everyone’s financial situation is different. You need to make a plan for yourself, and you can’t simply follow a cookie-cutter plan that someone else has created for themselves. You need to take stock of your individual situation and use that information to determine the best path forward.
Identify All of Your Debt. As part of being able to prepare a retirement plan that’s useful, accurate and more likely to help you retire debt-free, you need to understand all of the debt you currently have. Be sure to include all sources that, not just the ones that immediately come to mind such as your home mortgage, auto loans and credit card balances. Those will likely be the major sources of debt, but do you have any store charge card debt? What about student loan debt? Are you behind on paying utilities or have any other private debt obligations?
Limit New Debt. It’s also important that as you’re working to pay down all of your current debt before you reach retirement, you limit the situations in which you take on new debt.
If it’s time to replace your current automobile, for example, consider buying a reliable used car or perhaps a new car that’s less expensive than what you normally accustomed to. Avoid putting non-essential expenses like family vacations or shopping sprees on your credit card. Establishing these positive behavior patterns becomes increasingly important the closer you get to your planned retirement date.
Extend Your Target Retirement Date. Another technique you can use to improve your odds of retiring debt free is to give yourself more time to pay down your debt before you have to retire. This might be a matter of working for a year or two longer than you had originally planned, or it might mean continuing to work part-time throughout retirement.
Reducing Debt is Good, Too. Even if you determine that it’s going to be impossible to retire debt free, you can still benefit from paying down as much debt as possible before retiring.
Retiring debt free is a great goal to have. Freeing yourself from the worries of paying off loans can make your retirement is significantly more enjoyable time in your life.
Tags: debt-free retirement, reduce debt, retirement advice
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When most people think about retirement the image that comes to mind is one of financial security, flexibility and freedom. One part of this equation is having a large enough nest egg to pay for your lifestyle and expenses during retirement. The other part of the equation, of course, is to have minimized those expenses to the greatest extent possible.
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