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Boomers Beware: Top 4 Debts to Tackle Before Retirement

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 As a baby boomer myself (although one not looking to retire soon), I -- and my wife -- have been working to steadily reduce and retire some old debts. My exorbitant law school debt is long gone, and our
 home mortgage rate
 It’s at its lowest point and nearly paid off. Credit card debt has become virtually nonexistent.


 
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 The reason being, people usually reach their highest earnings in their 50s, and as this period of life moves further away, it’s wise and sensible to reduce expenses whenever feasible. Doing so allows us to allocate more discretionary funds towards our chosen activities or goals.


 Let’s delve into which debts hold the highest priority for elimination before retiring, and examine how reducing these debts as much as feasible can safeguard your savings and secure your financial future.

<h2 id="1.-high-interest-credit-card-debt">
 1. Credit card debt with high interest rates
</h2>

 Credit card debt ranks among the costliest financial burdens owing to exorbitant interest rates. By 2024, the typical U.S. annual percentage rate (APR) for credit cards stood at approximately 23.37%. Sustaining such substantial costs could swiftly erode your savings intended for retirement, transforming your hard-earned nest egg into nothing more than an empty shell.


 Eliminating revolving credit card debt should top the list as Public Enemy No. 1 in your strategy for reducing debt.
 
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 move your credit card debt to one of these top-ranked balance transfer cards that we recommend
 
 
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 You might manage to clear your debt earlier without facing extra interest fees.

<h2 id="">
 2. Mortgage balance
</h2>

 Taking on a mortgage during retirement can be feasible, provided you've planned accordingly. Numerous advisors recommend fully settling your mortgage prior to retiring, particularly if the interest rate is steep.
 
 or
 
 If you plan to live on a fixed income, redirecting your retirement savings towards your mortgage payments could restrict your financial adaptability.


 Now, if paying it all off entirely is not an option, think about at least
 refinancing your home loan
 Or downsize to a more budget-friendly home to maintain control over monthly expenses.

<h2 id="3.-car-loans">
 3. Car loans
</h2>

 Car loan payments can be quite burdensome, especially since the typical interest rates range from as low as 5.25% all the way up to an impressive 21.55%, depending on your credit score. Additionally, upkeep expenses tend to go up for more aged cars. The best strategy might just be to get rid of these debts entirely! It’s highly advisable to settle any automobile loans prior to retirement in order to minimize the number of bills you'll have to manage each month.


 Alternatively, think about selling one of your additional cars. You might prefer choosing a more fuel-efficient vehicle to lessen this economic strain.

<h2 id="4.-medical-debt">
 4. Medical debt
</h2>

 Although Medicare and supplementary insurance significantly alleviate healthcare expenses (thanks, FDR!), unforeseen medical bills can still occur, particularly during retirement. Consider this: Experts estimate that a retiree might require approximately $165,000 to cover healthcare costs throughout their retirement years.


 A key point regarding medical debt is that it often has room for negotiation. You can contact the healthcare provider and discuss the possibility of paying a reduced sum compared to what’s listed on your bill. Use the advantage of being a senior; this strategy tends to be effective.


 Here’s the key point: Getting rid of or cutting down on debt prior to retiring is crucial for ensuring a safer and less stressful post-work life. By addressing these financial obligations directly, you pave the way for greater monetary stability (not to mention an infinitely simpler) and more satisfying retirement years.


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 We strongly adhere to the Golden Rule, hence our editorial opinions belong solely to us and haven’t undergone prior review, approval, or endorsement by featured advertisers. Motley Fool Money doesn’t encompass every offer available in the marketplace. The editorial material from Motley Fool Money stands apart from The Motley Fool’s editorial content and is produced by an independent group of analysts. The Motley Fool has a
 disclosure policy
 .

Boomers Beware: Top 4 Debts to Tackle Before Retirement

Unknown debt, personal finance, personal finance credit, personal finance retirement, retirement planning

As a baby boomer myself (although one not looking to retire soon), I -- and my wife -- have been working to steadily reduce and retire some old debts. My exorbitant law school debt is long gone, a…

When My Dad Gave Me These 3 Credit Card Tips, I Listened. Today, They Still Guide Me.

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<ul class="summary-list">
 <li>
 My dad taught me a credit card is not an extension of your income — it's credit the issuer expects to be repaid.
 </li>
 <li>
 Once I received my first credit card, he advised me to make small, affordable purchases and to avoid carrying a balance whenever possible.
 </li>
 <li>
 He likewise cautioned me against making late payments and advised using my credit card wisely.
 </li>
</ul>

 After graduating from college, starting my career, and purchasing my first home, I concluded it was the right moment to get my
 first credit card
 Once I possessed the card – along with its substantial credit limit – I imagined using it to complete decorating my new apartment, purchasing plane tickets, or paying for weekend breakfasts.


 During an easygoing chat with my father, I brought up the fact that I had acquired a credit card. He didn’t seem too pleased about it. “A credit card? It’s the fastest way into debt! Make sure you use your credit card wisely,” he cautioned me.


 The amount of credit card debt hit a record peak.
 over $1 trillion
 According to a report from the New York Federal Reserve, his statement holds true: Americans currently bear the greatest amount of credit card debt in history and are also facing substantial interest charge rates as a result.


 Following my discussion with my father about using a credit card wisely, these are three tips I've continued to follow up until now, two decades later:

<h2>
 1. Begin with small, achievable fees
</h2>

 Rather than instantly putting that $2,000 dining room table on your credit card, opt for more manageable expenses that you can clear swiftly without sinking yourself deeper into debt. Using a credit card for something unaffordable leaves you with lingering balances that accumulate over time because of accruing interest.


 Recognize that a credit card does not increase your earnings. Instead, it provides borrowed funds from the credit card company that they anticipate will be repaid.


 When purchasing my new couch, rather than using a credit card and paying for it over several months, I waited until it was discounted (40 percent off during Black Friday) and then bought it with cash.


 
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<h2>
 2. Settle the full amount each month
</h2>

 The best approach for using a credit card is to clear your balance each month to avoid accumulating debt. Given that many credit cards have interest rates in the double-digits, maintaining a monthly balance can lead to significant additional expenses.


 Additionally, whenever you settle the full credit card balance each month, your
 credit utilization ratio
 stays low, which has a positive impact on your credit. If your utilization is over 30% it can have a negative impact on your
 credit score
 .

<h2>
 3. Never pay late
</h2>

 Once those credit card bills start coming in every month, there's one thing you must do: pay
 at least
 The smallest payment required by the deadline. My father takes his credit seriously, and so do I.


 If you fail to make a timely payment, you might incur both a late fee and additional interest charges on what remains owed. Additionally, such delays can negatively impact your credit score.


 Once you establish your online account, you have the option to configure complimentary text or email reminders that will alert you several days prior to your billing deadline. Alternatively, if you're confident with managing your expenses, go a step ahead by enrolling in automatic payments to ensure you never miss a due date.


 Have you ever had trouble paying your credit card bills leading to delinquency or default? If so, share your experiences and stories about credit score challenges and successes with this journalist at jstreaks@DIWIDA.


 The initial publication of this article took place in November 2023.

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When My Dad Gave Me These 3 Credit Card Tips, I Listened. Today, They Still Guide Me.

Unknown credit, credit advice, credit cards, personal finance, personal finance credit

Locate a Competent Financial Adviser Finding a financial advisor It doesn’t have to be complicated. With SmartAsset’s free tool, you can quickly match with up to three fiduciary financial adv…