By Yann Kostic on the May 2019 Edition
Ideally, we would all retire debt-free, but we are a nation of borrowers. As of December 2016, the average American household debt totals more than $135,000, according to a Nerd Wallet credit card debt study. Credit card debt for the average household carrying a balance totals more than $16,000.
Debt is particularly dangerous for those heading into retirement, because it puts pressure on an already limited budget. Yet the Consumer Financial Protection Bureau reports that 30% of homeowners age 65 plus still have mortgage debt. According to consumer financial information source Value Penguin, the average credit card balance of Americans 65 and older is $6,351.
Here are some suggestions for paying down your debt before you retire:
Live below your means. Try creating a budget that represents only a portion of your income. If, for example, you earn $6,000 a month, pretend 10% ($600) of that amount does not exist by transferring it automatically into a savings account.
Get an affordable mortgage or, even better, get rid of the mortgage all together. The average American’s highest monthly expense is housing; try to keep it low. Work to improve your credit score; it can make a big difference in your interest rate. Refinance when your score and the economy can offer you a better interest rate. Most of the time, moving south of the border allows you to sell your expensive real estate up north and buy a very nice property for about half the price, allowing you to get rid of your mortgage completely. Just remember to always rent in the area you are considering moving to, before committing to purchase.
Avoid credit-card debt. Credit-card debt can be tough to pay, down due to its typically high interest rate. Pay it down as quickly as possible, and from then on, pay it off completely every month.
You will find it well worth it when you retire.
Note: This material has been prepared for informational purposes only, and is not intended to provide financial advice for your particular situation.Note: This material has been prepared for informational purposes only, and is not intended to provide financial advice for your particular situation.