Whether you dream about traveling the world in retirement, or you’re more of a homebody, most people can agree on one thing. Retiring free of debt is ideal! No matter where you go or what you do, you will enjoy your retirement much more if you aren’t burdened by bills and rising interest rates.
However, with 80 percent of Baby Boomers carrying some form of debt, it might not be possible to retire completely free of it. So that might leave you wondering which types of debt are most important to address.
Credit cards. Of all forms of debt, credit card debt is probably the worst. Due to high interest rates, you might pay on them for years without making much progress. Consider a low-interest consolidation loan, and pay it off before you retire. Others use the strategy of transferring balances to cards with a zero-interest introductory period. Of course, this only works if the new card doesn’t charge a high transfer fee. If you can pay off anything before retirement, credit cards might be your best choice.
Student loans. You probably paid off your own loans years ago, but now you’re looking at the cost of college tuition for your children. In most situations, it is unwise to take on large loans for your kids. Yes, you mean well, but there are other ways to fund an education. There is only one way to fund your retirement, and you need every penny. If you do take out student loans for the kids, shoot for low interest rates and try to pay them off before you retire.
Mortgage debt. Most people have a mortgage, and it’s really not the worst form of debt. On the other hand, your house payment is probably your largest monthly expense. Before you retire, options like refinancing or downsizing to a less expensive home are options you should at least consider. You could free up hundreds of dollars – or more – from your monthly budget.
Of course, these are just general guidelines, and every situation is different. Call us with your financial planning questions and we can help you chart a course toward a satisfying retirement.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.