Once upon a time, it was common practice to pay off the mortgage and other household debts before entering retirement. These days, such a scenario sounds more like a fairy tale, due to weaker economic conditions. Between the recent housing crisis and rising prices of food and gas, household budgets are strained and high credit card debt is common.
Years ago, it was common for retirees to have already paid off their mortgages before quitting work. They then chose to either remain in the home, or sell it and utilize the equity to fund their retirements. These days, with housing prices still lagging behind their former levels, you can’t really count on the equity in your home to boost retirement savings. If you plan to sell the home and downsize to a smaller one with lower expenses, that may also prove difficult due to the sluggish nature of the housing market.
Along with credit card debt and low home values, many American seniors have taken on considerable debt to help their children through college. The U.S. Department of Education reports that the average debt load of parents who financed their child’s college education is $23,298. When you enter retirement, it’s possible you will still be making monthly payments on college loans.
If you’re carrying too much debt, it can have a serious impact on your plans for retirement. For one thing, having to make numerous payments to different creditors each month means you have less money to save. You may see retirement savings as less necessary, and could be tempted to cut back on the amount you set aside each month. Also, if you enter retirement carrying too much debt, you’ll need to plan for a higher budget just to pay for these living expenses. Debt can be a double-edged sword that leaves you with less savings in the bank but higher monthly bills.
Obviously, managing your debt responsibly is the best course of action to prevent this problem. But it’s never too late to formulate a better plan. Talk to your insurance professional or financial advisor about your debt load and retirement concerns, and he or she can help you find solutions for a more secure retirement.
This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
13431 – 2014/5/29