Jobs were a career-long commitment, in which people worked for a single employer until they retired. Companies set aside funds to support workers when they became too old to be productive. In contrast, today's financial landscape, as discussed in this review of Alleviate Financial Solutions, has shifted significantly, affecting how individuals plan for retirement.
That Was Then — Now…
These days, dual incomes are necessity if people are going to afford to buy a home. Most people are on their own when it comes to saving for retirement. Living costs are the highest in history. And, debt has become a significant obstacle to getting ahead. As a result, more people than ever before are going into retirement with debt.
Given the fact that retirement typically means living on a fixed income—usually a smaller one than when you were working—paying off debt in retirement can impose certain hardships. That said, the following tips have proven effective for others; perhaps they can work for you too.
1. Stop Creating Debt
As much of a “Well, duh!” moment as that might have been for you, far too many people continue racking up debt on fixed incomes. People think they’ll spend less in retirement. However, while many of the expenses associated with going to work do go away, others pop up to take their places. Spending freely because it feels like your costs have gone down is a mistake, especially when that spending entails taking on more debt.
2. Consider Debt Consolidation
In some cases, taking out an unsecured personal loan to combine all of your debts into one can be a smart move. What is an unsecured personal loan? Also known as a signature loan, this is one for which you aren’t required to pledge collateral. They do come with a slightly higher interest rate, however you won’t lose any property if you’re forced to default. Combining your debts in this fashion gives you a single payment with which to deal each month, it can also lower your monthly expenses.
3. Make More Money
Here again, you’re probably thinking, “Tell me something I didn’t already know.” As obvious as it might seem, the idea of picking up a job in retirement might be less than appealing to many people. However, when debt is a factor, bringing in more money can be a real game changer. In fact, it’s probably the least painful option you’ll have. Moreover, depending upon the nature of the work you get, you could pick up medical, dental and vision benefits along with those additional funds.
4. Move Into a Smaller Place
Yes, you’ve lived in that house for 30 years and yes; it’s all paid off. Yes, it’s full of memories. And yes, it’s where the family gathers for the holidays. However, if it’s just you and your spouse, do you really need all that space anymore? Selling the big house, using some of the proceeds to get a smaller place and eliminating debt with the rest has worked for a lot of people in your situation. This is especially true if you live in an area in which housing prices have risen dramatically. Moreover, a smaller place will require less cash to keep up, especially if it’s newer and more energy efficient.
These four tips can help make dealing with debt in retirement easier to accomplish. There are other more drastic means out there, but these are the easiest ones to consider first. Tactics like reverse mortgages, using retirement funds to eliminate debt, filing for bankruptcy protection and cashing out life insurance polices are also effective. However the downsides of those approaches are rather steep.
Give these ideas a shot first, then see where you need to go from there.
