Everyone knows just how important it is to save for retirement. Because of this, there really is no need to discuss the importance of it in length.
Rather than do that, Chapter 14 of The Definitive Guide to a Debt Free Life will focus on how to save for retirement the right way. At the same time that most people know why they should be saving for retirement, not many people know how to go about doing it.
So that is why we discuss retirement in detail below. In addition to saving for retirement the right way, this chapter also talks about getting out of debt before retirement and dealing with debt in retirement.
Simply put, everything that you need to know to make a successful retirement plan is included in this chapter of our guidebook.
Saving for Retirement
Saving for retirement takes time, effort, and commitment.
Your most important first step will be to start saving. Money will not pile itself up in your retirement savings account so you are going to have to start somewhere. Even small monthly deposits of $50 to $100 are a better start than nothing. When compound interest is factored into the equation, these seemingly small amounts of money can turn into a whole lot of dough years down the road.
In addition to setting money aside each month for retirement, you should also consider your retirement needs and set savings goals for yourself. Most importantly, figure out how much money you will need after you retire to keep up with your current standard of living. Knowing this will help you decide how much you need to save each month and if you are on track to meet your goals.
It is also essential that anyone thinking about saving for their retirement looks at their employer’s retirement plans. Many employers nowadays offer both a retirement savings plan and a pension plan to their employees. It is of utmost importance that you capitalize on these when possible.
If you have any questions on how to save for retirement, your best bet is to meet with a financial advisor. The experience and knowledge that these advisors have will help point you in the right directions. A financial advisor can help you make the right decisions about your retirement savings. (DOL.gov)
Get Out of Debt Before Retirement
Naturally, it is much more effective and beneficial to get out of debt before retirement than to struggle with it during your retirement.
Unfortunately, however, doing so is not always so easy. A great place to start is by considering your financial situation and your retirement needs. Both of these things will help you figure out how much debt you have and how much you are going to have to save.
It is important to understand that you should not do one or the other. You should not pay off your debt first and then save for retirement. The best plan of action is to do both at the same time.
You should make it a point to save for retirement (if at all possible) while also paying down your current debts.
Focusing on your credit card debt first can be a smart way to go as credit card debt is one of the leading causes of bankruptcy among seniors. When you are swamped with overwhelming credit card bills, tackle the ones with the highest interest rates first.
If your debt problem is really out of control, opting for a more traditional debt relief method like debt consolidation can be a smart move to take. Debt consolidation combines all of your debts onto a single account, most often with a smaller combined interest rate.
Finally, those looking to get their debt problem squared away before retirement might want to meet with a credit counselor. Credit counselors have been mentioned several times throughout this guidebook and for good reason: they are one of the best ways to get your financial life under control. (Kiplinger.com)
Get Out of Debt in Retirement
Moving ahead into retirement with debt up to your shoulders is no fun at all. This is why it is so important to at least downsize a portion of your debt (with the tips discussed above) before retiring.
It is important to note that at the same time you want to reduce your debt while in retirement, you should also be doing your best not to accumulate any more debt. Seniors today are the group with the highest amount of new debt in the United States, often because of rising medical costs or family obligations.
Once again, it can be extremely beneficial to meet with a credit counselor. They will be able to examine your personal financial and debt situation up close and tailor the best debt relief plan for you.
Many seniors are in debt because of family obligations. They feel obligated to help their children and families out with financial help, often to the point of destroying their own credit and piling up mountains of unpaid debt. This is especially true of seniors with children who do not make sound financial decisions of their own, constantly calling on mom and pop for more and more help.
The best thing for seniors to do here is to say no. Your financial life is important to and you need to focus on repaying your current debts before accruing anymore. As hard as it can be to cut your children off, it is generally in your best interest to do so, unless it is an absolute emergency and at least until your own debts are under control.
Medical expenses, on the other hand, have absolutely destroyed the solid financial standing of thousands of seniors across the country. Many seniors do not have medical insurance or are not fully covered. This means that they have to pay for the bulk of their rising medical expenses with credit cards – racking up even more debt.
The biggest thing is to not give up hope. Meet with a financial advisor or credit counselor and create a budget and expense plan. Cut down money where you can and put this money towards your debts.
Put your money towards your highest interest debts first and work on making minimum payments for the others. (NPR.org)
Retirement should be an enjoyable time. But debts and lack of savings can make it anything but that. The tips and advice on saving for retirement and getting out of debt discussed above should help make retirement the special time that it is meant to be.
Stay tuned for the next chapter of this guidebook where we discuss the many myths and pieces of misinformation surrounding debt.
- DOL.gov, “Top 10 Ways to Prepare for Retirement”
- Kiplinger.com, “Downsize Your Debt Before You Retire”
- NPR.org, “Retirement Gone Wrong: How Seniors Can Dig Out of Debt”