The best-laid plans often go astray, particularly when it comes to retirement. Even the most meticulous planners can’t prepare for everything — especially something like the coronavirus pandemic.
Surprise expenses and other things can chip away at your life savings. It’s not uncommon for retirees to find their savings are much smaller than they anticipated. But for those who retire with a mountain of debt, this harsh reality can be even more difficult.
According to the TransAmerica Center for Retirement Studies, 46% of retirees carry some debt (excluding their mortgages). Among this group, 14% have more than $10,000 in debt. Getting on top of these payments can seem impossible when you live on a fixed income — especially since the average retiree receives just $1,514 from Social Security every month.
Paying off credit cards and other forms of debt may be the last thing you want to do during your golden years, but it’s possible. ThePennyHoarder.com offers five tips that may be able to help.
Make — And Stick With — A Budget
First, take another look at your current budget, find ways to adjust your lifestyle, and pad your retirement fund in your free time, advises Joseph Valenti, AARP Public Policy Institute senior policy advisor.
“One thing we know from studies of retirement is that people have fewer set costs typically compared to when they were working,” he told The Penny Hoarder. “If they have more time, maybe they will be preparing more meals at home.”
If you’re unsure how to make a budget, there are many free tools available online to help. Once you make one, you’ll have a better idea of your financial circumstances so you can begin working on paying down debt.
Negotiate With Your Credit Card Providers
Checking your credit card’s interest rate will give you the most precise picture of your situation. Paying off debt is easier when you have lower interest rates. One way to reduce your rate is by requesting a new one, which Valenti noted is especially useful if you want to stop using credit cards.
“In some cases, even if you close that card, they will let you pay it down for little or no interest over a period of time,” Valenti explains. “That’s assuming you don’t need the card again.”
If you don’t want to negotiate with the credit card company yourself, you could get help from a credit counselor. These professionals can help you streamline your cards and possibly get a better rate for you.
Transfer Your Balance To A Lower-Interest Credit Card
You’re not doing yourself any favors by sticking with a credit card company that’s charging you more than they should. You may consider getting a transfer balance card with a lower interest rate than your current account.
Most balance transfer cards offer zero interest during the introductory period, which can help you pay off as much of your balance as possible. Before signing up for a new card, compare these factors to make sure you get the best deal:
- Balance transfer fees
- Interest rates
- Introductory period length
- Credit score requirements
- A credit limit that’s high enough to cover your total balance
Eliminate Expenses From Your Old Job
Are you still paying for things you signed up for while you were in the workforce, such as a membership to a gym near your old job?
Valenti notes that when you examine your monthly, quarterly, and yearly budgets, you might catch work-related expenses like clothing, cell phone bills, and transportation that you forgot about.
Cancel memberships to professional organizations and other work-related expenses. You don’t need to pay for these things if you no longer use them in retirement. A subscription tracking tool can make it easier to monitor recurring bills.
But if you decide to keep certain subscriptions or even that gym membership, don’t forget to ask about senior discounts!
Set Spending Limits For Yourself
When you had a job, you could offset occasional overspending a little more easily with your earnings. Plus, being mindful of those expenses was likely a little easier then, too. But with a fixed income, you don’t have the same wiggle room, and these little expenses can add up quickly — especially if you face a mountain of debt.
Valenti recommends opting for push notifications from your financial institution or credit card company. These carters could make it easier to monitor these expenses and prevent unwelcome surprises.
“It’s one thing to find out instantly through a text that you’ve reached a limit — even if it’s a self-imposed limit — as opposed to a statement that’s going to shock you at the end of a cycle,” he says.
- Connors, Tiffany. “8 Ways to Free Yourself of Retirement Debt (Including Credit Cards).” The Penny Hoarder, The Penny Hoarder, 18 Nov. 2020, www.thepennyhoarder.com/debt/debt-in-retirement/?aff_sub2=homepage.