Like many of their generation, my parents despised debt. When they were able to pay their mortgage, they did, what they called “burning the promissory note.”
Hard times have forced many to retire with debt. It is going to make your retirement difficult from a financial perspective. Social security and pensions only cover a limited amount. The debt problem has only gotten worse in recent years.
A recent survey found that the average retiree has about $ 19,200 in non-mortgage debt and increased their debt by $ 9,779 in 2020, an increase of 104% over 2019. 60% of retirees say they have difficulty paying for basic needs, including medical bills (47%), groceries (43%), and credit card bills (37%). ”
Some debts come with sudden unemployment or medical expenses. Discretionary expenses can contribute to credit card bills. Fortunately, if you plan well before retirement, you can avoid many forms of debt. This is what you can do now:
- Contribute to a health savings account. These vehicles can cover a wide range of health-related expenses not covered by your current plan. You can contribute $ 3,600 to a program just for you annually and $ 7,200 to a family plan. Contributions are tax free. If the withdrawals are used for health expenses, they are also tax-free.
- Avoid credit card debt. This is the most expensive debt and you can’t even deduct it from your federal income tax return. Find a way to pay your balance every month. Use debit cards.
- Create a debt elimination plan. You can prepay your mortgage principal every month to trim your balances and save thousands of interest. You can cancel installment loans. Try to pay cash as much as possible.