4 Tips for Managing Retirement Debt
When you exit the workforce, you gain back 40+ hours a week previously spent at the office — not to mention all the hours in the car or on a train commuting. With all the extra time on your hands, it’s easy to find ways to spend more money when every day is “Saturday.”
But if you’re worried about carrying debt when you retire, it can be hard to maintain the lifestyle you’ve envisioned. According to the Urban Institute, 41% of homeowners ages 65 and older still have mortgage debt.
The good news? There are steps you can take now to help free yourself from financial burden while living on a retirement income.
Work longer. Continuing your employment a few years more can benefit you twofold: you’ll help reduce the need for cash during retirement and delay cashing in on your Social Security benefits. According to the Social Security Administration, workers who withdraw beginning at age 62 currently receive an average of $1,112 per month.
Spend less than you make
Who doesn’t want to take exotic vacations or drive a fully-loaded car? But these expenses put a huge dent in your disposable income, which you could be putting away for the years ahead. The solution: live below your means while you’re still working. Create a budget that only accounts for a portion of your income; or if your household currently has two incomes, try basing your budget on just one.
Lower your interest rates on credit card debt.
According to CNBC, the average credit-card debt among U.S. households is about $5,700, rising to $6,351 for those 65 and over — and jumping to $6,876 for recent retirees between ages 65 and 69. And high-interest rates can make it easy to accumulate an outstanding balance. If you're working toward paying off high-interest debts, why not take steps to lower your interest rates? Consider cards that offer 0% APR on balance transfers or no interest during an introductory period. This gives you more time to pay off a balance without accruing more interest.
Consider a reverse mortgage loan.
It’s no surprise that paying off mortgage debt can be difficult for retirees living on less income. But the equity in your home can be an important asset and provide security during retirement. With a reverse mortgage, homeowners age 62 and older can convert a portion of their home equity into a useable resource, freeing up money to reduce monthly bills, refinance an existing mortgage, make home renovations, or cover medical care and/or in-home care.
“Financial planning research has shown that coordinated use of a reverse mortgage starting earlier in retirement outperforms waiting to open a reverse mortgage as a last resort option once all else has failed,” says Dr. Wade D. Pfau, CFA and professor at The American College, in Forbes. “Reverse mortgages have transitioned from a last resort to a retirement income tool that can be incorporated as part of an overall efficient retirement income plan.”
Unlike a traditional mortgage, a reverse mortgage has a flexible repayment feature: It provides the option to make no monthly principal and interest payments, as long as at least one of the borrowers lives in the home as their primary residence. As with any mortgage, the borrower must meet all loan obligations and keep up with property-related taxes, insurance, maintenance and any homeowners’ association fees for the loan to remain in good standing.
Having the funds you need to live the retirement you’ve dreamed of
Retiring debt-free is unrealistic for most Americans. But wisely managing that debt — and leveraging assets such as the home equity you’ve built — can help ensure that a more comfortable retirement lifestyle is within your reach. Learn how a reverse mortgage can help by connecting with an experienced reverse mortgage specialist from Reverse Mortgage Funding LLC. Call 888-277-1567 today for a convenient phone appointment.
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