Here’s everything you need to know about debt management in retirement.


Whether it’s student debts, a mortgage, a credit card, or a car loan, the majority of Americans are in debt. But what should you do with your IPass debts if you’ve retired or are about to retire?

Many Americans managed to pay off some of their loans during the early days of the crisis. This is when activity limitations and aid such as stimulus payments helped to strengthen household budgets.

From a report by the Federal Reserve Bank of New York, total household debt increased from $333 billion to $15.58 trillion in the fourth quarter of 2021. It is the highest quarterly increase since 2007. According to the Fed, credit card debt increased by a historic $52 billion during the same period.

According to a report by the Employee Benefit Research Institute, debt has consistently climbed in families with the head of the family aged 55 or older. This is a 68.4 percent in 2019 from 53.8 percent in 1992.

“As individuals retire, we’re seeing more and more people with various sorts of debt,” said Shweta Lawande, a certified financial planner at Francis Financial in New York.

Sort your debt into categories.

Some people may be unable to avoid debts while in retirement. Debt, on the other hand, is not all the same. A fixed-rate mortgage, for example, will provide less of a problem in retirement than a credit card, student loan, or medical debt.

“A mortgage payment is generally going to be a pretty steady payment over time,” said Shelly-Ann Eweka, senior director of financial planning strategy at TIAA. She added that it is also something most people have prepared for.

There are a variety of reasons why more Americans are retiring with mortgages: individuals are buying homes later in life, and due to low-interest rates, it makes sense to pay it down gradually over time. It’s also “positive debt,” according to CFP Diahann Lassus, managing principal at Peapack Private Wealth Management in New Providence, New Jersey.

However, if you have a lot of high-interest credit card debt, it may continue to grow during your retirement and add to your budget. More people are retiring with student loan debt, whether from their schooling or loans are taken out to help their children or grandchildren attend school. 

Those with personal debt may want to look into various loan forgiveness programs that would erase their loans after a particular period, for example, twenty-five years of timely payments.

Retirees should also refrain from taking on more college debt or withdrawing funds from their investments to assist members of the family with the cost of education.

“You can borrow money for education, but you can’t borrow money for retirement,” Lawande explained.

Homework on finances

Americans need to a thorough look at their money and debt before retiring to ensure that they are on track to exit the employment. According to Craig Copeland, EBRI’s director of wealth benefits research, this should happen by the age of 55.

“If you have a large credit card balance, you should target that first and then just pay your monthly mortgage as you go,” he advised. This should be done a few years before you expect to retire so that you can change your schedule accordingly. Working an extra year or two to pay off a huge credit card amount, for example, may make sense. Delaying your Social Security benefit could also help you get a bigger payment later on.

“Having those bills paid off before retirement is excellent,” Eweka remarked. 

It’s also preferable to paying off debt with money from a retirement account, she added. 

Depending on your age, this could result in penalties, set you up for a large tax payment, and pull more money out of the market than is necessary, all of which could influence your retirement income.

Getting your finances in order before you retire will also help you build good habits that will benefit you in the future.

“I can’t stress this enough: controlling spending is the bedrock of financial success,” Eweka remarked. It’s vital to stay inside your budget.”

Seek expert assistance.

Working with a financial professional can help you come up with a strategy for your future if you’re concerned that you’re not on track for retirement or are having trouble managing debt.

“Working with a financial advisor or financial planner can help ensure that your strategy is appropriate whether you’re thirty years away from retirement or five years away from retirement,” Eweka added.

According to Lawande, an advisor can assist you to comprehend your current financial situation and use a variety of imaginative projection and planning tools to help you design a course for the future.

“The bottom line is that if you don’t know your current position, it’s incredibly difficult to prepare for retirement and make sure you’re okay,” Lassus said.

It’s also critical that you continue to set aside money for retirement and emergency savings while you’re paying off debt, especially if your company matches your contributions. 

This is because market-based retirement savings will grow over time, and compound interest means that investing early will result in more later.

If there is a market downturn or an unforeseen expense, such as your car breaking down, having emergency reserves will prevent you from taking on extra debt.

“Make sure you have enough cash to get you from one crisis to the next,” Lawande advised.


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