Debt and Retirement: Can You Handle Both?

Edward Goldstein |

Saving enough for retirement while carrying and paying off debts can be an uphill battle. For some pre-retirees, debt repayment is the primary focus over savings, leading them to delay or reduce their retirement lifestyle. But if you’ve been struggling to save, It’s never too late (or early) to take steps to encourage you to get back on track.

Mortgage or Retirement First?

The days of mortgage-burning parties are a thing of the past. It’s estimated that almost 10 million homeowners aged 65 and older are still paying off their mortgages.

Whether or not it’s better to pay down your mortgage as soon as possible depends on your personal circumstances. We at Financial Life Planning can offer guidance based on your situation to reach the proper balance to avoid overreaching house rich/cash poor, paying down your mortgage too aggressively.

Alternatively, it is important to at least consider downsizing or moving to a more affordable location. Essentially it all comes down to prioritizing each individual's retirement financial goals and objectives.

Pay Down Consumer Debt

If, for example, your retirement assets are earning less than 6% a year, even a 9% credit card debt can cost you vital cash flow. This is why it’s considered important to get serious about credit card debt. With less debt, you’ll be able to put more toward your retirement savings, so the sooner you can start, the better.

  • Set a monthly target for debt repayment and try budgeting around it. Find ways to stretch essential expenditures and eliminate non-essentials if you can.
  • Review online subscription services for those that are no longer desired; such as those with a trial subscription that you may have forgotten to cancel. When everyone is moving away from paper statements, these types of recurring fees are easy to miss. 
  • Once you determine your "discretionary" cash flow, using monthly systematic investment and/or debt repayment is a great way to help keep you on track. 

Get to Work

If you can’t imagine not working for 20 or more years, you may want to join the growing number of retirees that use retirement as an opportunity to transition to a new career. Some choose to work as a contractor for their current employer, scaling back hours and responsibilities. Others choose to branch out and start their own business or monetize a hobby, however, making such a decision does not come without risk! This is where Comprehensive Financial Planning will provide a better understanding of the implications of such a decision. 

Instead of limiting your retirement to a life of leisure, you can use retirement as a way to trade in the work you had to do for the work you want to do.

We can work with you to take control, and make the most financially sound decisions to find a work-life balance that sustains you mentally, physically, and financially. To explore options for your situation, reach out using the “Click for a Free Consultation” button.  

Edward C. Goldstein, CFP®, MBA, President
Financial Life Planning, LLC
10,000 Lincoln Dr. East, Suite 201
Marlton, NJ  08053
Phone: 856-988-5480
Fax: 908-292-1040

This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.