As a result of increased housing costs and low wage growth, many Australians are carrying higher levels of debt into their retirement years. Unfortunately, repaying this debt can put a strain on retirement cash flows and make it difficult to achieve important financial goals such as maintaining a high quality of life and leaving behind an unencumbered benefit for future generations. For this reason, it’s essential to prioritize retirement debt management and explore strategies for avoiding or effectively managing debt in retirement.
Fortunately, there are a number of ways by which retirement debt can be avoided or managed.
Ways to Manage or Avoid Retirement Debt
- If you’re still working, increase your debt repayments. It may also be worth considering delaying retirement. However, bear in mind that with increasing age comes the increased likelihood of being forced into retirement by ill health.
- Tackle high-interest debt first. If you’re paying interest on credit card balances or personal loans and have the ability to redraw on a mortgage, pay off the higher interest debts from your mortgage account.
- Already retired? Look at using your superannuation to pay off outstanding debt.
- Downsize your home. This may allow you to pay off debts and still have enough to purchase a smaller home. If this strategy frees up more money than you need to repay your debt, investigate the superannuation incentives available to ‘down-sizers’. Also, be aware any surplus cash you pocket may reduce age pension payments.
In conclusion, managing retirement debt is crucial to achieving your financial goals and maintaining a comfortable lifestyle throughout your retirement years. While carrying some debt may be appropriate in certain situations, it’s important to carefully evaluate your personal circumstances and explore effective retirement debt management strategies with the guidance of a financial adviser. By taking proactive steps to manage your debt, you can enjoy a more secure financial future and greater peace of mind in retirement.
For help in managing your debt in retirement talk to your financial adviser.
Book a cost and obligation-free financial planning appointment today: https://bit.ly/your-right-choice.
Visit our website to learn more: https://rightchoicefinancial.com.au/