Your Debt and Your Retirement

: Chris Lee Law Firm

  Filed under: Debt

Planning for retirement is a steadfast process that takes intentional effort and dedication to saving money. Very few of us will have the luxury of having a large retirement that was funded by our employer, and instead must make every effort of our own to diligently save for retirement. Only 20 percent of Americans report being on track to saving enough money for retirement and even fewer people have any money saved at all. As the debt crisis continues to rise among so many of us working to make ends meet, how could we ever expect to have enough saved for retirement?Retirement and debt

Tough Decisions Ahead

For many, paying minimum payments on the debts each month is a victory in itself. While people try to stay afloat and out of delinquency, the importance of saving for retirement begins to weigh as a heavy competitor of financial priority. Going into retirement with unpaid debts can make retirement much more difficult and, in some cases, impossible. These days, more people are heading into a “working retirement” to make ends meet. For those living on fixed incomes with little to no savings, paying off debts that were accrued before retirement is nearly impossible. Before heading into retirement there are several things you should consider.

Make a plan. Planning for your retirement should begin the minute you hit the workforce. In addition to actively saving money, retirement plans should involve plans to prevent you from obtaining a large debt burden and ways to reduce and eliminate any existing debt burden. Before signing the application for your next loan, consider how many years it is going to take you to repay that loan. If you spend the majority of your working income repaying debts, you will have far less to put into savings or a retirement account.

Reduce your debts quickly. Before spending all of your extra income on debt repayments, make sure you have enough money saved to cover at least 3 to 6 months of living expenses, in the event of an unexpected job loss or financial hardship. When developing a plan to repay your debts budget as much of your extra income as possible for debt repayments. Contact your creditors to negotiate lower interest rates and other payment options to help you eliminate your debt as quick as possible. There are many credit counseling agencies available to help you develop a money management plan for debt reduction. For those that are experiencing extended financial hardships, you may want to consider bankruptcy as one option for eliminating your unsecured debts.

Gain extra income. The best way to secure a financially healthy future is to reduce your debt quickly and save money for retirement. Earning extra income, even for a period of a few years, can have you out of debt and money in the bank much faster than the pace of a single income. Experiencing financial hardships can be stressful, but adding a second job would provide you with the mechanism to secure the debt free retirement you deserve.  Once you see the progress you are making towards reducing your debt and building your retirement, those extra hours of work will be gratifying.

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