Retiring is an exciting time in life! However, you don’t want to stress about your finances. A plan of action now to help you reduce your debts before you retire is highly recommended, and it can ensure you retire when you want to with money for bills and leisure time. Here are some tips on how to reduce your debt before you retire:
Consolidate Unsecured Debt
Consolidating your unsecured debts such as credit cards will help you pay off the debt faster. A lower interest rate means more of what you pay goes towards the balance rather than interest.
There are calculator tools online to show you the savings. All you have to do is enter the current balance and rate of interest for your balances to see the possible outcome.
Credit card transfers can be a good option, too, as long as the fee is low and you can pay the entire balance before the offer timeframe expires. Don’t forget to carefully read the terms before you transfer the debt to ensure it is a great deal.
Pay Off Student Loans
Unfortunately, some people are still paying off student loans when they plan to retire. Some had a high balance; others had the amount due deferred for long periods of time. You should pay off any student loans that remain when possible.
If you can’t pay them off, evaluate the various payment options. There are different plans based on your situation. Some of them are income-based, for example. Find a payment that works for your budget to eliminate this debt in the least amount of time.
Downsize your Home or Pay it Off
If you own your home, it may be worth a great deal of money compared to what you paid for it. Downsizing to a smaller home can reap significant dividends from the sale of your current home. The funds can be enough to pay for a comfortable home and easier to maintain. The difference is money to save for your retirement or to pay off bills.
If you wish to remain in your current home, do what you can to pay it off before you retire. Paying more each month can help the primary balance decrease faster. If rates have dropped since your mortgage, consider refinancing the balance due at a lower rate, and this will reduce the interest on it and make it easier to pay more than the minimum due each month.
Pay off your Vehicles
Did you buy any vehicles? You should strive to pay off any vehicles you own before retiring, and routine maintenance can ensure your cars operate correctly and safely. Not owing money on cars is an excellent way to retire without lots of debt hanging over you.
Your money will grow faster when invested than in savings, but it’s never a good idea to put all your eggs in one basket. You should continuously diversify your investments to help balance gains and losses. It is a good idea to move aggressive investing accounts to more comfortable, lower-risk investments as you get closer to retirement, and this reduces the chance of you losing a big chunk of your retirement funds.