As you approach retirement age, your mind is probably on your investments—as it should be—but have you considered your debt situation? If you retire with too much debt, no amount of retirement income will cover all your expenses. Reducing your debt before you enter your golden years is an essential step in the retirement preparation process. Unfortunately, if you focus too much on reducing debt, you could miss out on important opportunities to grow your nest egg. At Crash Proof Retirement, we know that saving for retirement is a balancing act when you have debt because we help consumers make sense of it every day. Here are our tips for reducing debt before retirement.
5 Ways to Balance Debt and Retirement Saving
Prioritize High Interest Debt
When you retire, every dollar you spend on debt is a dollar that will not be available to cover your expenses. Therefore, high interest debt, such as credit cards, should be your top priority. The sooner you start to curb your credit card spending and pay down that debt, the better off you will be in the long run.
Pay Off Student Loans
Although your student loan debt is settled, many seniors wind up carrying student loan debt for their children. Even if you are a co-signer on your child’s student loan, a default on their debt could result in your Social Security benefits being garnished by 15% until the debt is repaid. As a result, seniors should make eliminating existing student loan debt a top priority.
Eliminate Auto Loans by Selling Vehicles
You may be able to free up some cash by reducing your fleet of vehicles. If you have an older vehicle that is collecting dust or you have lost the ability to drive, you might want to consider selling it as prices for used cars are soaring due to inflation. The money received from the sale could be invested into your retirement nest egg or used to pay down other loans or debt that you may have.
Think about Downsizing
Now that the kids have gone out into the world, you don’t necessarily need that big house in the suburbs anymore, especially if the physical demands of maintaining your property have become too challenging. A great way to eliminate one of your biggest debt categories—your mortgage—and free up some cash for investing is to sell your home and move into a smaller one.
Consider Refinancing Your Mortgage
If you are not ready to downsize your home, refinancing your mortgage can reduce your monthly payments and allow you to save more money that you can add to your retirement savings. With interest rates currently at historic lows, now could be the perfect time for a refinanced loan, especially now that the Federal Reserve is going to try to raise interest rates over the next several years, starting in 2022.
If you have not considered how debt will play a role in your retirement plan, it is never too late to start taking steps to address the problem. Just think of it as a different kind of investing. Once you remove the anchor of debt from around your neck, you can unlock your full retirement potential and strengthen your investing power. Of course, debt is not the only issue that can erode your retirement savings; market risk and investment fees can also lacerate your nest egg. High-risk securities-based investments like stocks, bonds, mutual funds, and more, are riddled with costly fees, and they can rapidly lose value during a stock market crash. The good news is that you can protect yourself using the proprietary Crash Proof Vehicles that are free from ongoing or upfront fees, that credit interest at rates comparable to high-risk securities-based products and are guaranteed to protect your principal from being lost during a stock market downturn. To learn more about the exclusive Crash Proof Retirement System, call Crash Proof Retirement at 800-722-9728 or visit crashproofretirement.com and join the more than 5,000 consumers who have already secured their financial future with peace of mind.