Confronting Debt Before I Retire

With each year that passes, I’m getting closer to retiring. I don’t want to retire with any debt. I read a recent U.S. News & World Report article that said a growing number of Americans are retiring mired in debt. As a member of Generation X, I still have time to rid myself of debt before I retire. I have decided to confront my debt head on without any excuses for why I can or can’t pay off my debt before I retire. According to the U.S. News & World Report article, 39 percent of households with at least one person who is in his or her early 60s had primary mortgages. What’s shocking is that another 20 percent of those people also had second mortgages. In order to be debt free in retirement, I review my “debt status” at least once a month.

Staying out of credit-card debt

I make it my No. 1 financial priority to have no credit card debt. According to a Consumer Financial Literacy Survey, 40 percent of people in the United States do not pay off their credit-card bills in full each month. My strategy has been to make mini payments to my credit card company throughout the month using my on-line banking. I am never shocked by a $600 credit-card that I can afford to pay at the end of the month.

Paying off my mortgage

I know a lot of senior citizens who pay mortgages until they die. In some cases, they are snowbirds who pay mortgages on their Florida homes but have paid off their Northern residence. I would rather have one paid-off home in retirement. Since I already live in Florida, I can retire in place. I am resisting the urge to buy a step-up home so I can afford to pay off my mortgage by the time I’m 50. If I absolutely had to move, I could take out a 15-year mortgage and still have my mortgage paid off by my full retirement age of 67.

Buying cars with cash

Even though I have a car loan at this time, I’d like to break the habit of financing a car. I’m putting money aside for my next car purchase. I followed the advice of experts who suggest setting up a car fund and investing in index or exchange-traded funds. I use my Roth IRA since I can take out the money I put in to purchase a car while the gains continue to grow for retirement.

Although experts suggest people nearing retirement come up with a debt management plan, I am working hard now so I won’t be struggling with debt in my 60s and 70s. As a last resort, the U.S. News & World Report article recommends filing for bankruptcy. Since bankruptcy can stay on a person’s record for 10 years, it would possibly devastate the credit history of a senior citizen. In most cases, bankruptcy doesn’t affect 401(k) and other retirement accounts. However, every state is different and laws change. I would never consider bankruptcy to be a valid option when there are so many ways to get out of debt no matter what age. I’m just glad I still have time on my side.

Related