Having a large amount of debt when you are ready to retire can present a challenge. Here are some tips on how to manage retirement debt.
Key Points:
A good place to start when you need to pay off debt in retirement is to update your budget or create a budget if you haven’t already. Keep in mind that your lifestyle as well as your income will be changing once you retire. Some ways you can lower your expenses are by:
Lowering your expenses will leave more of your income to go to your debt payments, allowing you to pay debt off faster. You can also use the beginning early stages of your retirement to prepare for the future.
If your income is not high enough, you may have to choose between saving or paying down your debt. Both can be beneficial, depending on your financial situation.
Because of taxes and penalties, it is rarely advised that you use retirement funds to pay off debt.1 If you are considering doing so, you should speak with a financial advisor or explore other debt relief alternatives like a debt settlement plan with ClearOne Advantage. A Certified Debt Specialist can give you a savings estimate over the phone at 866-481-1597.
Instead of withdrawing money directly out of your account, you could use any retirement income you are receiving to pay down debt. The trick is getting your expenses low enough to be able to make an impact on your debt. Keep in mind that if your goal is to pay down debt, you need to pay more than the minimum monthly payments your creditor asks for each month.
If you skim down your expenses enough you may be able to use your retirement income to pay off debt. The two main methods for credit card debt relief are the debt snowball method or debt avalanche method. See below how they differ to decide which one would be best for you.
Whichever option you choose, just make sure your fixed income can cover your usual expense plus your debt payment each month.
If you think you have too much debt to retire, you need to explore your options.
If you are struggling with debt in retirement, or can’t retire because of debt, talk to a ClearOne Advantage Certified Debt Specialist at 866-481-1597 today to discuss your situation, explore your debt relief options, and get a free savings estimate.
1. https://www.nerdwallet.com/article/finance/retirement-account-pay-debt