For those preparing for retirement, figuring out your budget can be daunting. According to the Fed, less than half (45%) of retirees aged 60+ years felt that their retirement savings were on track, while 13% of the same group had no savings at all.
For many Americans of retirement age, debt is a big issue. On top of figuring out savings and income sources, tackling credit card debt going into retirement can be daunting too.
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There are a couple courses of action you can take to tackle credit card debt before retiring:
Use your savings or sell assets to pay off debt in full
Include debt payments in your retirement budget
A home equity line of credit
Credit card debt consolidation
Below, we break down the pros and cons of some of these choices. This will help you understand the risks and rewards of either option.
1. Use savings or sell assets to pay off debt in full
Depending on the state of your savings and assets, you may be able to eliminate your debt before you enter retirement. This may be the right choice for you if you have enough savings to completely pay off your debts in full. You might also have assets, such as family inheritances or a vintage car that equal to your debts. Look into using those assets to zero out your debt so you begin retirement owing as little as possible.
2. Include debt payments in your retirement budget
If you cannot completely eliminate your debt with savings or by selling assets, consider how you might incorporate debt payments into your retirement budget. Will you still have income from a pension or social security? Can you make cuts to other elements of your budget like travel, entertainment or dining out? Sit down and run the numbers to ensure you can afford to include your repayment plan into your existing retirement income.
3. Home Equity Line of Credit
If you have equity built up in your home over time, you may be able to take out a line of credit on that equity to pay off your credit card debt. This allows you to get a lump sum to pay off your revolving credit card balances and then pay off that line of credit over time. Here’s the catch: This is a slightly risky option, due to the fact that if you default on that loan—your house is on the line—and the lender may seize your home from you.
4. Credit Card Debt Consolidation
If you’re overwhelmed with multiple credit payments while going into retirement—it may be time to simplify your payment schedule into one easy payment. Why stress now that you’re retiring? A credit card debt consolidation loan will give you the ability to pay off your revolving credit card balances, and allow you to focus on one monthly loan payment instead. After all, just because you’ll have more free time now that you’re retired, it doesn’t mean that you should spend that time keeping track of when each of your cards are due!
Because financial decisions are so personal, it’s important you only use the information we provide to guide your final choice. Retirement is supposed to be stress-free. Planning for retirement can be less stressful if you consolidate your credit card debt into one easy payment. After all, you’ve worked hard to earn your retirement. You deserve to enjoy every minute of it.