Avoid Carrying Debt into Retirement

Increased housing costs and low wage growth are seeing more Australians carry higher levels of debt into retirement. Repaying this debt can place a major drag on retirement cash flows and prevent the achievement of retirement goals. Most of us would ideally like to, at the very least, maintain our current standard of living in retirement, but having debts to service in retirement means that there’s less money to spend on living essentials. And lets face it, the last thing you want to be worrying about in retirement is debt.

To avoid debt in retirement, these are some ways to go about it:

The ‘pay off one debt at a time’ approach

  • Tackle high interest debt first- Make a list of things you owe money on. Then, rank it from the highest to lowest interest. Then focus on paying off the loan with the highest interest. If you’re paying interest on credit card balances or personal loans and have the ability to redraw on a mortgage, pay them off using your mortgage account.

Look into Downsizing

  • Downsize your home. This may allow you to pay off debts and still have enough to purchase a smaller home. If this strategy frees up more money than you need to repay your debt, investigate the superannuation incentives available to ‘down-sizers’. Also, be aware any surplus cash you pocket may reduce age pension payments.

What if I already retired?

  • Already retired? Consider looking at using your superannuation to pay off outstanding debt.

As always, it is important to take your personal situation into account. Endorphin Wealth is able to create personalised strategies taking into your requirements and creating a happy, worry-free retirement plan. For example, if your mortgage interest rate is low, you do have significant investments earning a good return. This also means you have a long life expectancy and thus carrying some debt into retirement may be worth considering.

To manage your debt in retirement, Endorphin Wealth have many experienced financial advisors familiar with the process of managing debt in retirement.

For an obligation-free conversation about your financial future, please contact us on 03 9190 8964 or at advice@endorphinwealth.com.au.

The team at Endorphin Wealth are passionate about helping people achieve their life goals with great financial planning. We are not licensed or owned by big banks and financial institutions. So the advice and wealth management we provide is always in our client’s best interests. We have the advantage of being able to access a range of products from different providers. This means that our advice can be tailored to our client’s goals. We have offices located in Sydney and Melbourne, where you can find a financial advisor that is suitable for you.