By Eric Tashlein
Your Finances
Eric Tashlein.
The youngest Baby Boomers today are 55 years old, and the oldest are 73. In other words, many are retired or closing in on retirement. Yet nearly eight in 10 Boomers carry some form of household debt.
Carrying debt into your retirement years is a recipe for trouble. You no longer have a paycheck coming in, so debt payments will eat away at the assets you need to produce investment income. It’s possible to handle some debt after you retire, but it can be a stretch and it won’t contribute to your peace of mind.
According to the April 2019 Transamerica Retirement Survey of Workers, 78 percent of Boomers carry debt, compared with 86 percent of Generation X’ers and 85 percent of Millennials. Among the Boomers, 43 percent have credit card debt, 49 percent have mortgage or home equity loan debt, 35 percent have a car loan, and 40 percent carry other debt such as student, medical, personal or business loans. Just 22 percent say they are debt free.
A separate Transamerica study that focuses on retirees narrows the numbers down further. Among people who already have retired, four in 10 cite paying off debt as a top financial priority. Three in 10 retirees carry mortgage debt and 45 percent have non-mortgage debt.
Paring debt is a major goal of retirement planning. However, it’s not a good idea to withdraw retirement funds to pay off debts. A financial planner can help you pay down debt while preserving your assets.
If you are approaching retirement with debt weighing you down, here are some ways to lessen the burden:
Stop taking on debt. This may sound obvious, but many people in their 50s add new debt into their lives, even if they are already heavily indebted. Many people assume they will continue working past retirement age, but unexpected job losses and health problems often curtail such plans.
Prioritize your payments. Credit cards usually carry the highest interest rates, so it’s a good idea to look at them first. Pay off the highest-balance, highest-interest cards first. The same principal applies if you have non-credit card debt: pay off the highest-cost debts first.
Increase your current income. Think about ways to increase your income and dedicate the extra funds to paying off your debts. This can range from taking on a second, part-time job to selling off some prized possessions.
Plan for remaining debt. Retiring with some debt is not the end of the world. Add the payments into your retirement plan and decide on some expenses that you will forego in order to make the payments, rather than using retirement funds. Savings are everywhere, from letting go of that morning cappuccino to putting off that dream vacation for a couple of years.
Eric Tashlein is a Certified Financial Planner professional™ and founding Principal of Connecticut Capital Management Group, LLC, 2 Schooner Lane, Suite 1-12, in Milford. He can be reached at 203-877-1520 or through connecticutcapital.com. This is for informational purposes only and should not be construed as personalized investment advice or legal/tax advice. Please consult your advisor/attorney/tax advisor.