One of your biggest financial goals should be to not only to reach retirement with enough money saved to live out your dreams, but also to retire debt free. You would think that would be the goal for the majority of people and that debt in retirement would not be an issue. But far too many Americans are retiring today with balances on their credit cards, hindering their ability to retire comfortably. Credit card debt is hard enough to handle when you are in the prime of your working life, but it can be a nightmare to manage when you finally hang it all up and retire.
Retirement With Debt Can Lead To Bankruptcy
There is a bigger issue to retiring with debt than just having an extra bill or two to pay every month to Visa or MasterCard. More than 20% of all the bankruptcies in America this year are from people ages 55 or older. That is almost a 100% increase from the number of bankruptcies that were reported in 2001 from the same age group. In fact, older Americans have almost 50% more debt than younger people according to studies conducted by CESI Debt Solutions (source).
Do Not Retire With Credit Card Debt
The CESI Debt Solutions study found that 56% of all retirees had outstanding debt when they finally quit working. Most financial planners recommend that retirees have enough retirement funds, assets, or pensions to generate 80% of their pre-retirement income for their Golden Years. So, for example, a person earning $60,000 the year they retire needs an investment portfolio that will produce an income of approximately $48,000 per year or $4,000 per month. Retirees would need a little over a $1 million a nest egg to produce that amount of income in today’s dollars. For many people, crunching the retirement numbers can be a daunting task, and still having credit card debt can stretch that already thin budget almost to the breaking point.
Delay Retirement Until You Are Debt Free
Very few retirees in the CESI Debt Solutions study said that they would delay retirement until they paid off their credit card and other debt. But, that is exactly what they should do. Working one extra year in order to pay off the debt can be the solution that helps set you up for success. Like most big life changes, it is the first six to twelve months that really make or break your transition. Delaying retirement even just a little while until you have all of your debts paid off can make all of the difference in the world to setting you up for success.
It seems that having debt when a person stops working should not be an issue that needs to be discussed. At first glance, retiring with debt seems ironic and irresponsible, but studies have shown that it does happen. And, it has been happening in greater numbers over the past decade, not less. But, career does not have to end in a sea of debt, bankruptcy, and ruin. Delaying retirement even for a short time can help you start off your retired life on the right foot without credit card debt.