How to retire with as little debt as possible

Why It Matters:

  • Managing debt can reduce stress levels
  • There are steps you can take now to reduce the amount of debt you’ll have in retirement
  • Don’t use your retirement savings on debt

Greg Glasgow tkc.profilePicture Written by: Greg Glasgow | Transamerica
July 22, 2019

3-4 Min readClock Icon

The last thing you want to do when it comes time to retire is to take all of the money you’ve saved and use it to pay off debt. That’s bad for your retirement plan and for your stress levels. The more in control you are of how your money will work for you, the more secure you’ll potentially be when it’s time to move on from the working world.


Whether it’s credit card debt, mortgage payments, car payments or other lingering loans, if you’re approaching retirement with a considerable debt balance hanging over your head, it may be time to create a strategy.

Here are steps you can take now to take control of your debt before and after you retire.

1. Make a budget

As a good starting point, review your monthly expenses and figure out exactly how much money you have to put toward your debt each month. Bankrate.com offers a good budgeting tool.

2. Pay off credit cards and lines of credit first

Because these credit sources reassess every month, it can take years to pay off. For example, if you make the minimum payment on a $10,000 balance, you could end up paying more than $5,000 in interest.

3. Manage credit cards wisely

If you can’t pay the balance in full every month, do your best to make more than the minimum payment. And keep an eye on your mail. Those zero-percent-interest balance-transfer deals can actually be worth it, as long as the transfer fees are reasonable and you make a note of when the regular interest rate resumes. A financial professional can help with the fine print.

4. Be smart about student loan debt

If you or your child took out student loans to finance their education, it’s time to take another look at how the loans are structured and who is paying them. Many financial professionals advise that you start repaying loans as soon as they come due and make more than the minimum payment.

5. Pay highest interest rates first

While scrutinizing credit card balances is a smart strategy, it’s also worth looking at all your debt and paying off accounts with the highest interest rate first – whether those are credit cards, car loans, or home equity lines of credit. Those account balances can grow quickly and cost you the most money in the long run.

6. Avoid taking on more debt

It may be tempting to take out a consolidation loan or apply for a new credit card to pay off your larger balances, but those typically come with fees and higher interest rates. Deal with the debt as intelligently as you can now, rather than pushing it into the future and causing yourself more stress down the road.

7. Consider retaining some debt

Surprisingly, becoming completely debt-free isn’t always the answer. Consider retaining debt in cases where you can make more in investments than you’re paying in interest (examples include a zero-interest credit card or a low-interest car loan) or when the debt is tax-deductible.

8. Don’t put every last penny toward debt

Avoid putting so much toward debt that you don’t have cash on hand in an emergency. At the very least, be sure you have nine to 12 months’ worth of living expenses in your savings account. If you don’t have emergency reserves, you may end up taking on even more high-interest debt to cover unexpected expenses such as car repairs or medical bills.

9. Pay as much as you can while you’re still working

If you have yet to retire — especially if you work at a company that provides an employer match on retirement savings — focus as much as you can on paying down debt in your remaining working years. This may include purchasing or paying off a dependable car you can use after you retire and making big purchases like furniture, appliances, and electronics.


Things to Consider:

  • A good starting point in taking control of your debt is making a budget
  • Creating a strategy to manage your debt can help reduce stress levels
  • Consider talking to a financial professional for assistance on how to manage your debt

Neither Transamerica nor its agents or representatives may provide medical, tax, investment or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.

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