In an ideal scenario, you should have paid all of your debts before entering into retirement. But one post-recession reality that most people have to contend with is the idea of entering retirement carrying a sizeable amount of debt.
Is it possible to retire sans debt? It is still possible. However, that is only possible if you have little to no debt prior to the recession and if you have made sound investment decisions when the stock market turned bullish.
But instead of striving to be debt-free during retirement, the more practical approach would be to plan around your debt and make the necessary preparations while minimizing stress and maximizing your enjoyment of your sunset years.
Here are a few personal finance tips that can help you attain those goals.
Eliminate unsecured debts
If you still have unsecured debts like auto loans, medical bills, and credit card debts, your first task would be to get these to around five percent (or less) of your total liabilities. One good way to do that is to negotiate with lenders for more favorable rates. Another option you can look into is applying for a home equity line of credit prior to retirement.
Avoid paying extra for mortgage
If your goal is to pay for your home in full before entering retirement, you will only face a substantial amount of stress because of your lower quality of life. Instead of stressing over paying your mortgage in full, focus on improving your cash flow by making the minimum payments.
Another way to increase your cash flow and minimize your retirement expenses is to downsize your transportation and your home. The best approach to achieve that would be to find a smaller home in an urban area where there is good public transportation. This allows you to minimize the expenses associated with the upkeep of a large home and a car.
Consider renting a home
And speaking of moving into a smaller home, you might want to rent instead of owning a home. You can drastically reduce your maintenance expenses and you can use the savings for an emergency fund or for more liquid investments.
Take a part-time job
One way to whittle down your debt without compromising your enjoyment of your retirement is to take on a part-time job. Taking a part-time gig for the first few years of your retirement can help reduce some of the stress associated with paying off debt. Plus, if you find work that is related to the things that you are passionate about, you can give yourself a good measure of self-satisfaction.