• Lower your monthly payments
  • Reduce stress and live your life
  • Avoid personal bankruptcy court

5 Debts You Must Dump Before You Retire

Don’t take your debts with you into retirement.  Your retirement lifestyle must fit the income that you will have once all of your debts are gone.

Debt to Dump Before You Retire

Many people are not hopeful when it comes to retirement and feel like they are sinking into quicksand with consumer debt.  Declaring bankruptcy looks like an option for some folks.  The prospect of retirement forces us to think about the debts that remain and how to get rid of them once and for all.

Debt stops a lot of people in their tracks when it comes to retirement planning. Many baby boomers face debt problems in addition to the standard mortgage that needs to get paid off.  Now there are other debts that have been acquired.  For generations to come, the signs of being able to manage debts are not looking better.

Five types of debt, in particular, must be carefully avoided.   But if you cannot avoid them, then your top priority must be dumping these debts before you retire.  Here are those five debts and what you can do to get rid of them:
Do not cosign a loan for your grown child

If at all possible, avoid doing this completely.
By cosigning on a loan for your child, you put your credit score at risk and you stand to lose any kind of emergency fund that you may need to draw upon later.

If you have already cosigned for the loan, you might want to consider helping to pay down the balance of the loan to a level where the loan can be refinanced and you will no longer be responsible for it.

Do not borrow from your 401(k) or any other retirement account

Borrowing from your own 401(k) can come back to bite you pretty severely and it is not worth the risk.  If you quit your job or lose it, you will have to pay back the full borrowed amount immediately. There is a steady increase in people who are borrowing from their retirement accounts and getting themselves into financial trouble as a result. They often end up drawing from their emergency funds or going into credit card debt, making their situation even worse.

Do not pay off the student loan debt of your child

Let your child take responsibility for their student loans by handling them on their own.  You can advise them as they consider how much they can manageably afford to take out, but do not make yourself responsible for their loans.  Your children should know what they are getting themselves into when they take out their student loans.  They are the ones obligated to pay them back.  Your money needs to be going into retirement savings.  Paying off other loans is something you cannot afford to do if remaining debts are standing in the way of retirement.

Get a handle on real estate debt

Do not assume that the mortgage on your home can be offset with tax deductions.  Factors affecting these deductions are likely to change and may rid you of expected tax breaks you used to rely upon.  If you have a house, your first goal should be to own your home completely.  Do not delay paying off your home by taking out home equity loans and making home improvements.  Get your home paid off as quickly as possible.

Deal with unsecured debts such as credit cards and car loans before it is too late

You should not retire while still owing money.  Your retirement lifestyle needs to be compatible with the amount of income you will actually have once all debts are gone.  Start to live frugally if you have to.  Try to see what it would be like to live on your retirement income for a month or two and get a feel for the adjustments you will have to make.  Get an idea of what you will have and what you will actually be able to do.  By adjusting your lifestyle and changing some of your habits, you can begin to make your retirement a reality.  With the money you save before retirement, you can get rid of those lingering unsecured debts as well.

Dump any loan that you are cosigning right now before you retire.  Dump your real estate debt before you retire.  Avoid going into more credit card debt.  Avoid paying off loans that are not yours.  Think about your retirement and give it the priority that it deserves.  Take your money and dump it into your retirement accounts and create a storehouse for the future.  By living within your means, dumping your debts before you retire, and scaling back to accomplish these things, you can retire with the security of knowing that everything is going to be just fine.  The path to retirement may require some hard decisions but the path is relatively simple and straightforward.

Things to Think About When Trying To Save Enough for Retirement

Regardless of your age you should be thinking about your retirement. How do you need to save? If you are not saving enough for retirement you may be forced to work for the rest of your life! If your retirement savings plan relies on “winning the lottery or marrying rich” you should take a more pragmatic approach so you can have something to rely upon during the best years of your life. You are not alone, most Americans are not saving enough for their retirement but you shouldn’t delay saving, The sooner you start the better off you will be so let’s look at why people aren’t saving and what can be done to mitigate this problem.

Save Enough for Retirement

Retirement Planning Is Complicated and I Have Other Obligations

Most Americans have never taken a financial investing class or learned financial terminology. We don’t know the consequences of credit and not saving for a “rainy day”. Consumers simply don’t see the urgent need to invest for retirement so they put it off and wait till they are in their mid to late forties before actually investing anything and by that time you have to take riskier investments to generate a big enough return to meet your needs.

The most important step is creating a plan and putting away a small amount of money each and every paycheck, this amount can balloon over time into a considerable amount of cash but you need to start investing now.

Investing for retirement is not overly complex and by following these tips you are going to be taking a very big step in the right direction.

How Much Is Enough?

Each person has their own distinct financial needs, for one person $100,000 per year is more than enough and for others they would feel destitute. What you need to do is look at your current living expenses and multiply it by roughly 50%. Since your mortgage and debts should be paid off by the time you retire you just need to cover your basic living costs. You should plan to live to 80 or even longer. There is a considerable number of Americans who are living longer than ever and you need to take that into consideration when planning how much is needed for retirement.

The Early Bird Catches the Worm or In This Case Retirement Goal

The adage “The early bird catches the worm” is very appropriate for individuals planning for retirement. The sooner you start saving the more time your savings can mature and provide you with the returns you need to sustain yourself throughout your golden years.

If you want to make the savings even more manageable plan to retire a few years later. There is a considerable number of Americans who are staying in the workforce longer, Some of them do so due to financial constraints but unless you have something you really want to do there is no point retiring if you can still be economically productive. What you need to do is start off with something small and watch it balloon over time into a large nest egg. Granted it is not easy because it is a new skill but if you stick with it you will realize it isn’t so bad saving for the glorious day when you can say goodbye to work and hello to life.

How to Get the Upper hand

This is your first time investing so we want to help you realize your ultimate goal which is saving enough for retirement. If you follow these easy to apply suggestions you will be one step ahead and have peace of mind.

  • Reduce debt and stay away from new debt. Debt is one of the biggest threats to your financial well-being so stay away from it. If you are in debt don’t bother saving money for retirement until the debts are paid off. The interest rates being charged on these debts will be considerably higher than what you will earn in the market.
  • Only invest in things you understand. You shouldn’t invest in something “because everyone else is doing it”. Instead follow the golden advice provided by Warren Buffet which is only invest in things you understand and that have a “durable competitive advantage”. When you invest in something you don’t understand you could lose everything because you don’t know how to properly assess the risks.
  • Give your investments time to grow. We are all impatient it is part of being human but if you start investing early your investments will grow in value which helps you achieve your savings goal. Just remember there are no “risk free investments” and if you come across an investment that claims to be risk free you need to avoid it like the plague.

The fact you are reading this is a positive sign. If you stick with these suggestions you will be saving enough for retirement just be patient with yourself and you will realize your retirement saving goals.