Not so long ago, most Americans worked their entire lives in one company, lived a conservative life, and retired debt free after paying off their mortgages. However, the current reality is starkly different, with an increasing number of people retiring with significant debt. According to CNBC, 68.4% of families with the head of the family 55 years of age or more have seen their debt levels increase. While repaying debt before retiring may not be realistic for many people, doing it after retirement can be challenging! Some strategies that may help include:
Stop Clocking Up Debt
Most people assume their expenses will go down after retiring but your lifestyle, added travel, and a dream home may drive up costs. When you have a fixed income after retiring, you must not add to your debt, especially credit card and personal loan debts that carry high APRs. You should live within your means and devote the surplus to paying off your debt. You should also know how much retirement savings you have by logging into the solo 401k website.
Don’t Make Rash Decisions
Some people realize they have not saved up enough to lead a comfortable retired life and make rash decisions to earn more quickly to make up for the lost time. They try to do things they have no idea about or don’t suit them. They jeopardize their retirement and often their family relationships. If the retirement savings are inadequate, you could think of working longer to take advantage of larger Social Security monthly payments or look for ways of earning better returns on your savings.
Take Up Additional Work
Adding an extra income stream is one of the best ways to make you more financially secure. Depending on your skills, and inclinations, you can become a consultant, a gig worker, or even wait on restaurant tables. It may not be what you have dreamed but often the best method of paying off debt. By extending your working life is you may be able to get health insurance to get to the age when you qualify for Medicare. You can also give more time for your retirement savings to grow.
Downsize, Especially in a Rising Home Price Scenario
If you own your home or a significant part of its equity, you can consider selling it off and moving to a smaller home or a less expensive place, especially if property prices are on an upswing in the place you live. A smaller house is cheaper to maintain, requires fewer repairs, and attracts lesser property taxes. If you can move to somewhere with a lower cost of living, you can use the surplus money from the sale and the savings to eliminate your debt.
If any of the above strategies do not prove workable, you can consider paying off your debt with your savings. However, you must exercise a lot of care as you will compromise many years of savings. You will also need to consider the impact of taxes, inflation, and penalties. You can also consider taking a home equity loan, consolidating high-interest debt, or using a reverse mortgage to pay for your mortgage.