You probably imagined that your retirement years would be relaxing and relatively stress-free. However, for people who will carry financial worries into retirement, freedom from stress may not be a reality.
The prospect of receiving a limited income, the potential of dealing with medical problems, and the desires to leave an inheritance to loved ones while having a proper quality of life can be conflicting agendas. However, many of these concerns can be addressed by first attacking any debt that might be causing financial problems and even emotional turmoil.
Though there can be more obstacles to eliminating debt in retirement, know that it’s not impossible to do so. Just a little creativity and determination should get the job done. Here are some ideas to get you started.
Consult with a Professional
Speak with professionals that can give you information about how to handle debt in retirement. There may be strategies that can reduce your tax liability, increase your income, or eliminate some expenses altogether. All of these possibilities can put more money into your pocket and make way for accelerated debt repayment.
Prioritize and Manage Debts
Many times, people don’t realize that they can reduce their debt by making small changes in their accounts and the way their debt is organized.
For example, you can prioritize repayment of higher-interest debt by making extra payments on it. Other options include moving debt to 0% APR or lower APR credit cards to reduce rapid balance increases due to high interest rates.
You could even consolidate your debt with a reverse mortgage. This loan helps you access the equity in your home and use the money however you like. Many people use it to consolidate their debts. A traditional mortgage can be a big debt for someone in retirement. A reverse mortgage first pays off your mortgage and no monthly payments are required on the reverse. That means, you can increase your monthly cash flow savings. Why not use all or a portion of that extra money each month to put towards paying off other debts?
Reduce Your Cost of Living
Though this may sound like the exact opposite of what you expected for yourself in retirement, just know that it may not be a permanent situation. Ways to decrease your expenses can include sticking to a budget, negotiating better prices on bills and utilities, or opting for shared living arrangements. The good news is there are plenty of resources online that can give you creative ideas around decreasing expenses.
Once you are able to decrease your expenses, you’ll have more disposable income to work with. Remember, the less money you spend, the more you can reserve for additional debt repayment.
Increase Your Income
Though you might not have expected to work in retirement, rest assured that there are ways to increase your income aside from continuing to work. However, if you’re open to the idea of working, consider doing so on a part-time or contract basis. Don’t forget that participating in the gig economy allows you to earn additional income while you make your own schedule and, in some cases, set your own rates.
If you’d rather not work, there are still ways to earn more money in retirement. You can rent out spare rooms in your home on platforms like AirBnB. There are other platforms that allow you to rent your car out for hire, too.
Aja McClanahan is a freelance writer and owner of www.principlesofincrease.com.