Like many of their generation, my parents despised debt. When they were able to pay off their mortgage, they did what they called “burn the bond.”
Difficult times have forced many into retirement with debt. It will make their retirement difficult from a financial point of view. Social security and pensions only cover a limited part. The debt problem has only worsened in recent years.
A recent poll found that the average retiree has about $ 19,200 in non-mortgage debt and increased their debt by $ 9,779 in 2020 – a 104% increase from 2019. About 60% of retirees say they are in trouble have to pay for basic necessities including medical bills (47%), groceries (43%), and credit card bills (37%).
Some debts come with sudden unemployment or medical expenses. Discretionary spending can add to credit card bills. Fortunately, planning well before retirement can help you avoid many forms of debt. Here’s what you can do now:
- Contribute to a health savings account. These vehicles can cover a wide range of healthcare expenses not covered by your current plan. You can donate $ 3,600 annually to a deductible program and $ 7,200 to a family plan. The contributions are tax-free. If the withdrawals are used for health care expenses, they are also tax-free.
- Avoid credit card debt. This is the most expensive debt, and you can’t even deduct it from your federal tax return. Find a way to pay off your balance every month. Use debit cards.
- Create a debt relief plan. You can Prepay your mortgage amount every month to trim your balance and save thousands in interest. You can pay off installment loans. Try to pay with cash as much as possible.