4 Simple Ways to Pay Down Debt in Retirement
If you are retiring while in debt, you are not alone. Read to see how you can pay down debt without an income coming in.
Updated on May 29 2020
Retirement is supposed to be one of the most relaxing times in your life. You’ve worked for decades, raised your children, and budgeted and saved. But, for those who are retiring with debt, it can be anything but a carefree time. Without income coming in, how will it be possible to pay down debt?
Create a budget
We will always stress the importance of a budget, no matter what your finances look like. However, it is true that a budget is especially important if you are trying to get out of debt. Take a hard look at your finances and see where cuts can be made. Read about non-discretionary and discretionary expenses and see what you can cut down on. Once you have a budget, you must meticulously follow it.
If possible, consolidate your debt
Much consumer debt can be consolidated into one personal loan with a lower APR than if you were making payments on each separate loan or credit card you have. This is a way to easily manage your payments and decrease the amount of interest you will pay in the long run.
Find part-time work
If you are retired but needing to pay off debt, you may find some relief in working part-time. However, be mindful of the stipulations put in place to receive your Social Security benefits if you retired before the full-time retirement age. SSA.gov tells us:
“In 2020, if you’re under full retirement age, the annual earnings limit is $18,240. If you will reach full retirement age in 2020, the limit on your earnings for the months before full retirement age is $48,600. Starting with the month you reach full retirement age, there is no limit on how much you can earn and still receive your benefits.”
Part-time work can be a great way to not only pay down your debt, but help you stay an active member of your community and meet other retirees.
It may be time to downsize
Downsizing is a reality for many seniors, not just those who are in debt. As you grow older your mobility is likely to change and you won’t need quite as much space as in previous years. If you find yourself with a mortgage or car payments that are putting you over the edge, downsizing is a great option.
Though a happy retirement is the ultimate goal for most workers, it can be scary no matter your financial situation. However, if you find yourself drowning in debt with no additional income, it can be downright overwhelming. A fiduciary financial advisor will help you find the best way to get out of debt and enjoy your retirement years.
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