3 Reasons to Be Debt Free in Retirement

Jan 1, 2016
Author: Scott Hanson


Do You Know PRECISELY What You Owe?

Do you know the amount of your monthly expenses? The exact amount? The startling truth is that most of us don’t have a solid handle on what the price tag is for our fixed expenses. What’s worse, is that this means there’s a lot of unnecessary spending and waste that could be turned into money that stays in your pocket or gets used for discretionary spending.

What will your fixed income look like post-retirement? For any soon-to-be retiree, it’s critical to know what the outgoing and incoming numbers will be once the regular employment paycheck is no longer part of the equation.

The first step to maintaining a healthy financial retirement life is to know exactly where and how you are spending your money. Learn how to cover the fixed costs necessary for living—such as utilities, food, insurance, mortgage, property taxes—with fixed income.

Think guaranteed INcome to cover guaranteed OUTlay.

Cut Costs to Earn $$$

My business partner Pat McClain, the co-host of Hanson McClain’s Money Matters financial topic radio program, likes to remind us that money not going out is the same as money coming in. When it comes to balancing our income and debt spreadsheets, the best option may be one that approaches the dilemma from different angles. That is, trying to maximize and improve your retirement income sources, working to diminish debt, and decreasing excessive or unnecessary spending.

It may sound simple, but for most of us accustomed to a particular quality of life entering retirement—it’s not so simple when we are forced to crimp our lifestyle in order to keep the books balanced. That’s when credentialed, trusted financial advice can make a world of difference by helping to lay the groundwork for your quality of life once you stop working.

Have an Advisor Walk You Through Your 7 Personal Decision Points

Manage Risk

We live in an uncertain economic world. Interest rates rise and fall, markets fluctuate, tax laws change. These changes can impact your investments, which could result in a decrease in your retirement income.

Ask yourself: If your retirement income declined, would you be forced to take on debt? Debt in retirement can not only make it more difficult to do the things you want to do, such as travel, it can make it more difficult to meet your day-to-day expenses. While all investments carry some risk, there are strategies for portfolio management that could help you guard against the need to borrow money. Proper asset allocation is an important step to weathering market fluctuations and helping to keep you out of debt.

Crush Debt Before Retirement

Many Americans have a spending problem. Borrowing and credit card debt are again on the rise. Debt is the #1 killer of retirement dreams, and it should be your top priority to conquer it before you retire. First, accurately assess the situation. At your current rate of monthly payments, how long until you are debt-free? Do you have strategies that could help you pay off your obligations more quickly, such as consolidating payments, transferring balances, and minimizing interest fees?

Tally up car loans, mortgages, student loans, credit cards, lines of credit, and the like. Then, ask yourself, what does that represent in monthly cash flow. That’s the number that could be in your pocket during retirement, instead of going out the door.

If you’ve been saving and preparing for retirement, but are still stuck in a cycle of debt, rest assured, there’s a strategy for improvement. The transition into retirement is a complex and ever-evolving process that includes expenses and debt management. But it takes expertise and planning. Schedule an appointment with your financial advisor today.

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