High Debt Is Putting People’s Retirements at Risk—Here’s What to Do

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Retirement is the well-earned period of relaxation that follows a lifetime of hard work. Stereotypes of retirement paint an idealized picture: Sitting under the swaying palm trees outside your beach condo, sipping fruity drinks and cashing in on the senior discounts at local restaurants. Or packing up your spacious RV to traverse around the country, no strings attached. Babysitting the adorable grandkids during the day. Each person’s retirement has the potential to be as unique as they are—provided they have the solid financial foundation to allow them to do whatever they want in their golden years.

Unfortunately, high debt is putting people’s retirements at risk. One study found Americans ages 65 to 70 in the 50 largest metropolitan areas are still carrying an average of $20,643 in non-mortgage debt. Credit card balances and auto loans make up most of this debt, but some seniors are still paying off their mortgages too.

It’s going to be much harder to enjoy retirement if you have any sort of debt weighing you down. Here’s what to do to secure your financial future.

Get Rid of Your Debt

Saving for retirement while racking up debt is counterproductive. It pays to get serious about debt elimination now, whether you’re 25 or 65. This will free up more money for retirement account contributions and stop the accumulation of interest that’ll drain your savings later in life.

Working with a credit counselor—who can then set you up with a Debt Management Plan (DMP) if needed—is one way to get your financial ducks in a row. DMPs streamline multiple debts into one, generally with a reduced interest rate so you can pay it off over the course of three to five years. You’ll pay off your full balance, but may save hassle and money on interest.

If you’re looking at your pile of debt and thinking something along the lines of “How am I ever going to pay this off in full?” then you may want to look into debt settlement. This strategy entails making regular deposits into a special account until you reach a certain threshold. Then negotiators from the program in which you’ve enrolled reach out to creditors, attempting to settle your debts for a percentage of the original balance. This is primarily an option for people who have more than $10,000 in unstructured debt and are struggling to pay even the minimum due. For instance, Freedom Debt Relief reviews tell the stories of many consumers who tried debt settlement because they were so buried in credit card debt they saw no way out. When you’re in a desperate situation with debt, retirement tends to fall to the back burner—in turn making it tough if not impossible to set yourself up for the future you want.

If you have a mortgage, you may choose to refinance it and use the difference to pay down your most pressing debts. But be aware this may mean you’re still paying off your mortgage in your retirement, so you’ll have to allot for this recurring expense.

You may also choose to tackle your debt on your own by budgeting and making serious lifestyle changes. The money you free up can then go toward repaying your debts faster so you avoid accumulating costly interest. Just make sure you have a plan that keeps you motivated and accountable.

Live Well on a Fixed Income

Living on a fixed income during retirement is challenging but possible. Most retirees live on about $32,000, with half living on less than $50,000 annually. Now just imagine how much harder it is to stick to a fixed income when you have debt and interest dragging you down.

Instead of letting debt put your retirement at risk, take action now to reduce or eliminate it. Then you can focus on enjoying your post-work years.

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