Ways to Retire or Live Debt Free

Are you nearing retirement?  Do you have a lot of debt going into retirement?  There are some steps you can take to make sure your retirement is one that is debt free.  That is the best way to retire anyway and one that will help you to ensure your retirement is as good as it possibly can be.  Since 2007 the average debt of a 55 year old has been increasing thereby increasing the amount of their salary that is dedicated to the reduction of debt.  And by increasing the amount one has to pay for their debt that decreases the amount you are able to save for retirement.

The first thing anyone who is trying to get out of debt or is planning on retirement needs to do is create a budget of all of their expenses and their income.  Without knowing how much you have and how much you are spending there is almost no way you will be able to get out of debt before you retire.  There are many ways available for you to plan and make a budget.  If you prefer a spreadsheet to track your income, daily expenses, and do comparisons I have a good Excel based spreadsheet that is easy for anyone to use.  For a nominal fee you please clink the following link, Excel Budget.  If you prefer a web based spreadsheet I recommend the following link.  This is a great budgeting tool that unlike my spreadsheet you can access from any computer to do your inputs or run any reports you may want and they will even email you tips and tricks to stay on target with your budgeting.  You can find that method at Web Based.  However you decide to do your budget you need to also be using any extra funds you have or get to pay down high interest debt such as credit cards.  In addition to my Excel spreadsheet for budgets I also have an Excel spreadsheet you can use to help reduce and pay off your debts.  Also for a nominal fee you can get the debt reduction spreadsheet at Debt.

As you can see if you have bought the debt reduction spreadsheet I have the key to getting out of debt is to pay more than the minimum on one debt until it is paid off then move to the next and repeat the process again.  You simply do that until all of your debts are paid off and you are now debt free.  If when you budget you do not have any extra money to make these payments it is time to look at what your expenses are and decide what are some of the things you can do without on a short-term basis that will enable you to make the extra payments and get out of debt as this and budgeting are tools that everyone needs and are not limited to someone who is retiring.

Now going into retirement is a good thing but bringing your mortgage with you into your retirement years is not something any financial planner would recommend.  If you have a mortgage and it is scheduled to be paid off in your retirement you can project how much extra you will need to pay on a monthly basis to have your mortgage end as you begin retirement.  I would not recommend a refinance unless it will save you considerable interest payments but by keeping a 30 year fixed mortgage you can add principal payments each month and have the debt paid off by the time you retire.  And the bonus to keeping the longer mortgage is in the event you are in a financial situation you can skip a month or two of extra payments and it will not affect your mortgage just the end date.  And once the financial situation passes you may resume the extra payments.

The final way to help ensure a debt free retirement is to limit your contributions to your work retirement plan to what the company match is and nothing else until the debts are paid.  While I do not recommend reducing your retirement savings it can be advantageous to limit them to what your company will match as that is an instant return on your investment and is free money.  Never give away the free money unless you have no other options available to you.  And like the mortgage you are free to increase and decrease the amount you contribute as often as your company will allow.  But it is best to put in the maximum you are allowed to get the match and pay off the other higher interest rate debts first.  After that is done you can increase the contributions again.  As far as paying off the mortgage there are some tax advantages to having the mortgage that you will have to determine if it is best to pay it off and then raise your contributions or pay the mortgage as you planned in the previous paragraph.  Also mortgage rates are comparatively low right now so if you bought or refinanced in the last five years it is likely you enjoy a low interest rate on your mortgage anyway.

Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.

Not readable? Change text. captcha txt
0