Even the best-laid plans can go astray, and when it comes to retirement, it couldn’t be more true — especially if you go into it with credit card debt.
According to a TransAmerica Center for Retirement Studies poll, 46% of retirees have non-mortgage debt, while 14% are at least $10,000 in debt.
When you leave the workforce and start relying on your nest egg and government benefits, this burden can weigh on your hopes for a relaxing, stress-free retirement.
Fortunately, it’s possible to get out of debt while in retirement. The Penny Hoarder offers five tips to help you get started on the road to a happier retirement.
Create A Budget
Getting a grip on credit card debt as retirement inches closer begins by giving your budget a closer look.
Lifestyle changes and utilizing your free time to supplement your savings is another good way to start, Joseph Valenti, AARP Public Policy Institute senior policy advisor, suggests.
“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.”
There are many resources and tools available to help you make a retirement budget, including this guide from Penny Hoarder.
Creating a budget gives you a clearer idea of your financial picture so you can start finding ways to pay off your debt.
Ask Your Credit Card Issuer For Help
Your next step is reviewing your credit cards’ interest rates. Getting out of debt is much easier if you’re collecting less interest on the principal.
Valenti recommends negotiating a lower rate with your credit company, especially if you plan on ditching the plastic in retirement.
“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 explained. “That’s assuming you don’t need the card again.”
If the causes for your credit card debt are intermittent, such as a prolonged illness, ask your credit card providers if they offer hardship programs.
If the thought of negotiating with your credit card issuer seems daunting, you can ask a credit counselor for help. These professionals can arrange your credit accounts and work on your behalf to secure a better interest rate.
Use A Balance Transfer Card
Sometimes being a loyal customer can do more harm than good. If you’ve used the same credit card for years, moving the balance to a balance transfer card may mean a more affordable interest rate than what you currently pay.
As you decide which card is right for you, compare these factors for all options:
- Fees (generally $5 to $10, or 3% to 5% of the amount you transfer)
- Interest (aim for 0%)
- Introductory APR length (generally 12 to 18 months)
- Credit score requirements (typically good to excellent)
- Credit limits (you want one that’s higher than your total balance)
Look up the debt lasso method to learn how to save even more when you use a balance transfer card.
Eliminate Old Work Expenses
By assessing your monthly, periodic, and yearly budget, you might find a few work-related expenses that you no longer use but forgot to cut, says Valenti. These bills could be anything — a gym membership near your old office, transportation, clothing, or phone.
Cancel these services, subscriptions, and other automatic expenses related to work, so you don’t end up paying for things you no longer use or need. This subscription tracking tool from Penny Hoarder can help you stay on top of recurring charges.
Of course, if you keep a few things, such as that gym membership, always ask about senior discounts.
Use Phone Alerts To Limit Spending
When you were in the workforce, you could get by with a few small discretionary purchases that put you over your budget. But when you live on a fixed income and you’re strapped with credit card debt, you (literally) can’t afford this.
To make it easier to monitor your spending and stay on top of your budget, Valenti advised opting-in for push notifications from your credit card issuer or bank.
“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 said.
Most financial institutions have a mobile banking app, so check your phone’s app store and download it if one is available. These apps contain many helpful features that can help you monitor your spending and your budget.
- Connors, Tiffany. “Here Are 8 Ways Retirees Can Pay Off Credit Cards.” The Penny Hoarder, The Penny Hoarder, 21 Jan. 2021, www.thepennyhoarder.com/debt/retirement-debt/?aff_sub2=homepage.