Reducing Debt before Retiring Makes For an More Enjoyable Retirement
A poll recently conducted by CIBC showed that in Canada, nearly 60 percent of retirees carried some type of debt. Granted, it is less than younger folks that were still working, but these older Canadians are not as likely to try and pay of that debt sooner than later. That means they will carry that debt for longer periods, incur more interest fees and have less ready cash on hand.
The actual figure for retired Canadians with debt was 59 percent. Compare this with the 76 percent of younger, non-retired Canadians. Of the retired group, 27 percent have made an extra or lump some payment on that debt during the past year. The non-retired group had an average of 42 percent. Retired Canadians averaged a 1.65 debt ratio, while non-retired Canadians had a debt ratio of 2.64 percent. The debt ratio figures included mortgages, credit cards, loans and lines of credit.
It is harder to pay down debt faster when retired. Often times retirees have a fixed income and that must cover the day to day living expenses. This comes before paying extra on debts. Retirement plans can also be affected because of a lack of cash flow. That retirement account must now go to debt, rather than an easy retirement.
All of this emphasizes the fact that paying down debt before retirement is the best way to go. Canadians are working on this as a whole, as seen by recent reports, but it remains a problem for many. There are ways to get that debt paid off sooner than later.
First, consult a financial advisor and make a plan for paying that debt down. The advisor can look at your situation and advise you on debt products that can decrease your interest rate and give you the best scenario for payment. Try and pay more than the minimum every month. While interest rates are low now, this will help you when they do increase, and eventually they will.
Plan a budget and stick to it. Some banks offer credit card customers special spend alerts that let you know if you’ve gone over budget for the month. It’s easier to keep track. Within that budget should also be a plan to put aside money in a savings account each month. A financial advisor can help you with all of the above.