5 Tips for Tackling Debt During Retirement

If you’ve spent a lifetime working, then you’re probably looking forward to a stress-free, relaxing retirement. Don’t let financial woes hang over your head and threaten to put a damper on your retirement years.


 

By tackling debt, you can set yourself up for an enjoyable, rewarding post-career lifestyle. This is true whether you’re still working or you’ve already pulled yourself out of the workforce.

Come up With a Plan

Regardless of the size of your debt load, it’s important to come up with a solid program for tackling it in earnest. Making occasional payments as the mood strikes you won’t allow you get the maximum possible benefit from any efforts you make to reduce your debt burdens.

By preparing a strategy for tackling debt, you can dedicate your resources in the most effective possible way while achieving a measure of peace of mind about your finances.

Prioritize Your Most Pressing Obligations

Every item of debt that you possess comes with its own interest rates, terms and conditions and penalties for late payment. This is why it’s critical to establish a system of dealing with the most onerous and expensive forms of debt first.

Payday loans and credit card balances tend to spiral out of control if not paid down in a timely way, so your loan and credit card debt should be at or near the top of your list. Loans are another big-ticket items that could scupper your plans if you don’t take steps to address them sooner rather than later.

Your mortgage, while it might be sizable, can probably wait a while especially if it’s a fixed-income loan. As long as you pay the minimum amount due each month, inflation will probably do quite a bit to lower your overall liability as time marches on.

Think About Taxes

It’s time to start withdrawing from any retirement vehicles that you had the foresight to invest in when you were younger, such as Roth IRAs and 401(k)s. The tax implications of how much you take out and when can have a big impact on the amount you actually have remaining to spend after the government rakes off its cut. This is true of your mortgage as well because your interest payments might be tax-deductible.

Besides managing your taxes skillfully in the surroundings you currently inhabit, you can investigate the possibility of relocating to a state with a lower income tax rate. Some of them don’t even levy taxes on personal income, so you can save a bundle by heading over to one of these areas of the country.

Generate an Income

Many retirees discover that a life of leisure, free from the concerns of the workaday world, isn’t all that they had hoped it would be. By taking on part-time or freelance work, you can alleviate boredom while generating funds to help you discharge your debts. The more money you can make, the sooner you’ll be tackling debt and the better off you’ll be in the long run because you’ll be able to nip compound interest in the bud.

Finding non-traditional work has become easier than ever before largely due to the omnipresence of the internet. According to a survey conducted by market research firm Edelman Berland, 53 million Americans engage in freelance work, and there’s no reason why you can’t join them. This type of employment offers flexible working hours, independence and freedom, so it’s perfect for retirees who don’t wish to commit to a full-time, 9-to-5 job.

Make Alterations to Your Spending

There are plenty of changes you can make to lower your monthly spending and free up cash to tackle your debts. If you’re living in the same house that you inhabited when your kids were little, then you’re probably paying for a lot of extra space that you don’t use. Swap your home for a more reasonably sized residence to enhance your financial prospects going forward.

Another avenue that might be worthy of exploration is a reverse mortgage. This will allow you to live in the same place and receive a monthly sum with the provision that the property will transfer to the mortgage holder after your demise.

Cutting back on entertainment, dining at restaurants and other recreational expenditures may seem contrary to the whole purpose of what retirement is about, but it’s essential if you’re spending too much. After all, overindulgence now could mean a more spartan life in a few years if you haven’t been wise with your money.

Take care of your debts promptly, and then you’ll have more money for the finer things later on.

Tackling debt works

Looming debt is a specter that you can put to rest in order to ensure a retirement of ease and convenience. Confront this monster head-on in the present so that you can avoid its depredations in the future. With the right combination of planning, dedication and intelligence, you can get the most out of your remaining years without worrying about money-related troubles.

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Maricel Tabalba About Maricel Tabalba

Maricel Tabalba is a freelance contributor for Credit.com who is interested in writing about personal finance advice for Millennials and college students. She earned her Bachelor of Arts in English with a minor in Communication from the University of Illinois at Chicago.

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