What Are the Best Ways to Get Out of Debt Before You Retire?
Entrusted Legacy Law
Feb 10, 2023
Pennsylvania - Greater Pittsburgh Area
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Retirement is an expensive affair, and planning for it involves managing finances even after you've left the workforce.
It's commonly estimated you should have about 70 percent to 90 percent of your pre-retirement income to maintain the same living standard after you retire. A secure retirement means planning your finances efficiently, saving for the future, and paying debts.
Though planning your finances and retirement savings is relatively easy while working, doing this while carrying a debt burden isn't. It's long been debated whether it's ideal to save for retirement or first pay off one’s debts. Focusing exclusively on paying off debts can reduce your retirement savings, while saving alone won't prove fruitful if your debts have piled up. So what’s the best approach?
Generally, first pay down any high-interest debts you may have, then move on to a combination of debt repayment and saving strategy.
Here are some types of debts and the best ways to get out of them before you retire:
Consolidate your credit card debt
While credit cards are an excellent financial tool, not being able to manage your balances can pose problems. Getting rid of these high-interest debts at the earliest opportunity should be your priority.
Consolidating credit card debts can help you pay off your debt sooner and improve your financial situation. For instance, through a debt consolidation loan, you can merge several debt accounts into one — which can mean not only a reduced interest rate, but also a lower monthly payment than the typical credit card.
Once you have paid your credit card debt, avoid falling back into the red. Instead, target paying off other high-interest debt next.
Explore the repayment plans for student loans
Having student loans is another big hurdle to retirement planning. Or, perhaps you're a co-signer on a student loan for a family member. Co-signing a loan can put you at financial risk and affects your credit score.
The first step to clearing your student loans is to know exactly how much you owe. Then find out what repayment plans and options are available to you. There are several student loan repayment plan options, including standard repayment, income-driven repayment, and extended repayment. Keep in mind that you can pay more than the minimum payment to speed up the process and focus on retirement savings.
Refinance your mortgage and car loans
While mortgage and car loans are relatively low-interest loans, you still need to plan them practically. In the case of car loans, rethink whether you need more than one car. You may consider selling one off and using that money toward the loan and insurance of one car.
With mortgage loans, consider two possibilities: Invest some money and use the returns toward paying off the loan. Or, refinance these loans for a lower interest rate and a shorter payoff term. This can lower your overall payment, which means you have more money on hand.
Bottom line
In addition to the above, it is advisable to avoid taking up any new debt as you near age 50. Once you prioritize your debt, getting out of it shouldn’t be a hurdle for long.
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Elder Law 100 Pinewood Lane Suite #303, Warrendale, Pennsylvania, 15086Our Firm Prepares You for Life What makes our firm different is that we were built with the needs of growing families in mind. We understand you are BUSY, you are growing, you are planning for a life of prosperity and you value ease, convenience and efficiency. You are raising children, and caring for elderly parents, while also working hard to build your own nest egg for a lifetime of support. You want to know youve made the best decisions for your family and that your plan will work when your loved ones need it most. You want to make sure your minor children would be raised by the people you choose, and never by anyone you wouldnt want, and that your teens and adult children are properly prepared to care for you and what you leave behind. You want to feel confident that youve made the right choices, and handled everything so that you arent leaving behind a mess, when something happens. That is our focus as well. Weve developed unique systems to give you the same access to a Personal Family Lawyer as was previously only available to the super-wealthy, so you can have the guidance you need to build and maintain a life of prosperity and wealth. And, to keep your family out of court and out of conflict, which is the greatest risk to the people you love and all you have created, even if youve already worked with a traditional lawyer or created documents online. Our Team Is Here for You We encourage communication with our clients. In fact, weve thrown out the time clocks so you never have to be afraid to call with a quick question. Everything we do is billed on a flat-fee basis, agreed to in advance, so there are never any surprises. We have a whole team to serve you. When you call our office to ask your quick question, you wont have to wait hours or days for a phone call back. Youll get your question answered, right away. And, if you need to schedule a more in-depth legal or strategic call with your Personal Family Lawyer, a call will be scheduled when you're both available and ready for the call so we can make the very best use of your time and not waste your time by leaving voicemail after voicemail back and forth. And, we ensure the most important details of your planning are followed through on and your plan continues to work throughout your lifetime. We have a funding coordinator to ensure your assets are owned the right way throughout your lifetime and none of your assets will end up going through a long, expensive court process or being lost to the state because they were missed after your death. Weve created unique membership programs to keep your plan up to date year in and year out as well as give you access to our Trusted Team of Legal Experts for guidance on ANY legal or financial matter. One day you will need a lawyer. I dont know why and I dont know when, but when you do, you will be grateful you can call on us and well be here to advise you or get you out of a jam. We Help You Transfer Your Life and Legacy Lastly, we believe your financial wealth is only a small part of your overall Life and Legacy Planning which is made up of your far more valuable and most often lost upon incapacity or death intellectual, spiritual and human assets. These assets are what make you who you are, and sum up whats most important to you. And, a survey of inheritors has revealed that what they care about even more than inheriting your money, is inheriting these intangible assets. Most estate plans only focus on the transfer of your financial wealth to the next generation. Most people have such great intentions of passing on the intangible, but very few ever get around to it. Its just not a priority, until its too late. How much do you know about your grandparents values? Their most prized personal possessions? How they felt about you? What they had learned during their lifetime? If you are like most people, you know very little. Thats why we build the capture and passage of these most valuable assets into every estate plan we create. Not only will we help you pass on your money, but also your values, your insights, your stories and your experience the truly valuable assets your loved ones care about the most. Weve developed a tool that allows us to capture and pass on your whole family wealth, including your Intellectual, Spiritual and Human assets. I cant go into all of the details here, but well definitely talk about it when you come in for your Life and Legacy Planning Session.