Saturday, August 18, 2012

How to Deal With Debt When Retired

Retirement (Photo credit: 401(K) 2012)
It is ideal to pay off all debts before retiring. But at times, it is inevitable. You may have entered your retirement age but you still keep several outstanding debts that you have to deal with after you retired from employment. Getting retired does not mean you are spared from debt problems. You still have to deal with those.

Some experts advise individuals nearing retirements to postpone their retirements until they pay off all their debts. This is to make sure they will still have regular income and a source for paying dues. If postponing retirement is not an option, a retiree can still earn income by taking a part-time job, which may not be directly related to his former job.

Plan your retirement well. Aside from bolstering your retirement savings, try to eliminate all your debts. If you can’t help it, here are some logical strategies to deal with debts after retirement.

Use debt consolidation.

Debts should be paid even after you get into your retirement years. You may have stopped working and generating regular income but you are expected to continue paying your financial obligations. Retirement will not be a passport to neglect and not seriously take your debt problems.

If you still have debts to pay during or after getting retired, try debt consolidation. There are debt consolidation loans with better terms and lower interest rates. Secured loans will give you better rates and terms. As an alternative, you may use low-interest or 0% interest incentives of your credit cards’ balance transfer features. Again, after using the service, try to repay the amount as quickly as you can. Some balance transfer offers only apply lower rates or 0% rates within a limited or specified period so be aware.

Pay debts with higher interest rates first.

You may opt to pay off balances or pay slightly above minimum required payments on some of your debts for the meantime. Try to pay off debts with higher interest rates first. That is because you can save more money by doing so. The high interest rate payment can be added to the payment you make to get rid of other debts.

Keep on paying diligently. Make it a goal to lower your total debt as quickly as you can. Paying little interest will help you save on costs. As you go on to repay your obligations, you may also try to tighten your financial belt by living practically and frugally. You may expect to emerge out from the debt problem in a few years.

Once you get rid of all those debts, take a breather. Try to resist the urge to obtain loans and other forms of debts again. Live within your means so as not to make your coffers run empty. Your retirement years can be enjoyed more if you will not think more about those financial obligations you owe to anyone. During retirement, it is better not to live a stressful life anymore. Enjoy your years and get past debt problems.

Andrew enjoys blogging about personal finance and especially topics such as debt consolidation and management. Over the last 4 years, Andrew has written numerous articles and has been an active contributor in personal finance forums.

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