Retirement – many view it as a time of relaxation and enjoyment earned after putting in years of hard work. No more alarm clocks, traffic jams, or daily routines to worry about. Your time is now yours to spend as you please!
But for many working adults, the reality of approaching retirement might not feel like a celebration—especially for those dealing with outstanding debt. According to the Survey of Consumer Finances, 60% of U.S. households with adults aged 65 or older find themselves carrying debt into their retirement.
If you find yourself facing a similar financial situation, consider these tips as a helpful guide for effectively managing your debt and move into retirement with greater peace of mind.
Focus on Paying off Credit Cards
As of 2016, more than 34% of senior households experienced some form of credit card debt. While there are several forms of debt one can accrue, credit card debt tends to be one of the more financially draining.
The reason: high interest rates. Unlike mortgages or car loans which tend to have relatively low fixed rates, credit cards often have much higher interest rates. Unless you’re able to pay your balance in full every month, those interest rate charges can quickly add up and make paying off your credit card more challenging.
A good rule of thumb is to focus on paying off the credit card with the highest interest rate. To do so, try making more than the minimum payment every month and avoid adding any new charges. This mindful approach will allow you to make a realistic game plan and overall timeline for tackling credit card debt.
Use Bonuses or Tax Refunds to Your Advantage
When you’re working to pay off debt, any extra money that you can find to contribute to your financial goals is worth taking advantage of. One approach that can be extremely helpful is to reserve funds received from any work bonuses and apply them directly towards your debt. Or, if you are not in a position that earns bonuses, you can still take a similar approach with your yearly tax refund.
Remember, even if you’re not able to pay off your debt entirely, contributing larger chunks of money at one time will still provide you with a noticeable reduction in your debt repayment. In return, seeing that visible debt reduction can help further motivate you towards your financial goals.
Avoid Taking on New Debt
As you find yourself closer to retirement, try to avoid taking on any new debt. If you must, crunch the numbers and plan ahead to make sure you can have that debt paid off on time. Not only will adding another financial commitment take more of your monthly resources, but it can also create unwanted stress and anxiety—especially if that repayment continues after you’ve stopped working and find yourself on a fixed income.
Consider Delaying Your Retirement
Data from the U.S. Census Bureau shows that the average age for retirement within the United States is around 63. However, if you find yourself in good health and capable of continuing work, you may want to consider the option of delaying your retirement.
Adding just a few extra years of work not only provides the opportunity to earn more money, but it can also allow you to continue paying off any lingering debt that you may owe. And, given that Medicare technically begins at the age of 65, you can avoid having to worry about the additional healthcare costs you’d incur if you retired before then.
The Time Is Now
When it comes to retirement, it’s never too early or too late to start planning for your financial future. Whether your retirement is right around the corner or still a few years away, know that ACCS is here to help guide and support you. Contact us today to speak directly with a debt specialist and learn more about effective ways to manage your debt.