Living a Debt Free Retirement

debt free retirementIn a perfect world, we enter our years of retirement debt free and ready to enjoy all the fruits of our many years of hard labour. Unfortunately this isn’t always the case. According to a study collected by Statistics Canada, one in three retirees have debt. Though this was a  Canadian study, it is probably safe to assume that the statistics are fairly similar in the United States.

Consumer Debt Troubles 

Against what I would initially think, most of the debt held in retirement is in the form of consumer debt. According to the same Statistics Canada study, 57% of retirees 55 years and older hold some form of consumer debt and only 20% carry mortgage debt. I would have thought, and hoped, that if one was entering retirement the only debt they would have, if any, would be mortgage.

Co-Signed Debt

I shouldn’t be surprised by these statistics though, especially given my current financial situation. My mom is entering retirement never owing debt of her own, but because of me, technically owes over $40,000 since she has co-signed my student lines of credit from my undergraduate degree. Though it is my responsibility to pay off my lines of credit, and they were used for my education, my moms name is permanently attached to this debt until I pay it off. Being the responsible child that I am, I would never default on my lines of credit, or force my mother into a situation to have to pay them, but fact remains that if I did default, they would fall back onto my mom. Not an ideal financial situation for a woman just having entered her retirement. I’d be interested to know how many retirees have made it to debt freedom only to re-enter the debt circle because of a co-signed loan for a loved one.

Other consumer debts retirees may owe could be in the form of credit card balances, payday-type loans or even their own outstanding student loans. God help me if I approach my retirement still owing student loans.

Live a Debt Free Retirement 

Living a debt free retirement starts with taking a look at the types of debts you owe and coming up with a plan to get them paid off. If you’re like my mom and ”in debt” because of a co-signed loan there’s not much that can be done at this point other than encouraging the co-signee to work hard to pay the loan off for both of your sake.

If you’re nearing retirement and still you hold mortgage debt, you may want weigh the options of working even one year longer if it means entering retirement debt-free.  Retirement will be much more enjoyable if you’re not stressing about having to pay your mortgage balance off on your new reduced income.

Holding consumer debt in retirement should be avoided at all costs. With no job and a new fixed income, paying off consumer debt will be infinitely harder in retirement. All consumer debts should be settled pre-retirement when you have a steady income and the possibility to increase your income through different avenues.  If you have already entered retirement with consumer debts such as unsecured lines of credit, credit card balances or payday loans, and are having difficulty paying the balances in full, you may want to consider debt consolidation to help ease the stresses of your retirement’s fixed income.

Retirement should be enjoyed and stress free. You work very hard for a good many years in order to be able to afford a comfortable retirement. Don’t let debt be a wrinkle in your retirement dreams. Take care of any unsettled debts prior to leaving the work force permanently, and then enjoy your new-found freedom from alarm clocks and schedules.

About Catherine MacLean

Comments

  1. I think you need a plan to be debt fee when you retire. I only have a mortgage and car loan and I am amking additional payments to pay it off before I retire.

  2. The only debt I plan to have in retirement is mortgage where it’s generating income through rentals. There might be other “debts” like this but it’ll be purposed for bringing in income. Hopefully I can make it through with this plan. We’ll see how it goes. ha!

Speak Your Mind

*