Tips to Help You Live Debt Free in Retirement
Most people hope for a retirement that is relaxing and low stress. However, if you have a lot of debt heading into retirement, it can be the complete opposite. But it doesn’t have to be that way. Here are some tips that will help you live debt free in retirement and enjoy yourself more.
Try to Payoff Your Mortgage Before Retirement
Heading into retirement with a mortgage can be tough. While you may have been able to comfortably afford your payments while you were working, doing so becomes a lot more difficult when you’re retired. If you want to live debt free in retirement, you’ll need to pay off your mortgage while you’re still earning an income.
Take advantage of prepayment options and apply tax refunds, bonuses, and any other large sums of money you receive to your mortgage as lump sum payments. Talk to your bank for details on how you can do this without being hit with a penalty.
A lot of people downsize when they retire. This is a good idea. If you have children, they’re likely out of the house by this point, so you probably don’t need the same amount of space. You can save a lot of money by moving to a smaller property and use the proceeds from selling your home to retire comfortably.
One good tip is to downsize before you actually retire. This can give you the extra cash you need to be comfortable and, if you still have a mortgage on your home, selling it and moving to a smaller property can help alleviate some financial stress and get you closer to being able to live debt free.
Retirement doesn’t have to mean not working at all. It could mean working part-time or occasionally taking on contract work or freelance work. Not only could this work help you pay the bills, but it will keep you busy. The beauty of working part-time in retirement is that you can be more particular about your work. You can choose to work on projects that truly interest you or take on contracts that have special meaning.
We all have a number in our heads for when we’d like to retire. However, the reality is that actually retiring at 55, 60, 65, or whatever age you’ve always dreamed of tends to be tougher than it looks. If you’re pretty close to the age that you wanted to retire at, and it doesn’t look like you’ll be able to live debt free in retirement, there’s nothing wrong with working a couple extra years.
You can use this time to get your finances in order, save up some extra money, pay down your debt, and put yourself in a stronger financial situation. It’s better to retire at 67 with no debt and some savings than it is to retire at 65 with debt hanging over your head.
Prioritize Debt Reduction
Saving for your retirement is important, but not if it means entering retirement with debt. This means that, as you approach retirement, it’s a good idea to start focusing on debt repayment, even if that means sacrificing some savings. Debt can get very costly since you’ll have to pay interest every month. This becomes even more difficult to do when you don’t have a regular income.
Save What You Can
Before you retire, you’ll want to optimize your financial situation. You have two choices: one to find a credit counsellor or a licensed insolvency trustee. This will help you live debt free. What does “optimize your financial situation” mean? It means reducing spending and cutting costs so you’ll have more money in retirement.
When you’re not working, you’ll need to get used to living on a reduced budget. For a lot of people, it’s a good idea to start doing so before you actually retire. Not only will this get you used to live with less, but it can also help you save. Every dollar you save before you retire is a dollar you’ll have to invest in your retirement, making it easier to live debt free.