This current expense destroys too many retirement plans, but it doesn’t have to ruin yours

(Kailey Hagen)

Retirement changes a lot, but that doesn’t change the fact that we still have bills to pay and those bills can be overwhelming at times. There’s one type of debt in particular that wreaks havoc on people’s finances, and it’s unfortunately common among retirees. But that shouldn’t weigh on you.

Making this repayment a priority now can help your finances now and in the future and improve your chances of retiring comfortably.

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It starts small, but it rarely stays that way

More than three-quarters of retirees have some type of debt, according to a recent Clever Real Estate survey. It’s no surprise to find car and mortgage payments among the most common types, but there is one type of debt that is even more prevalent.

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About 67% of participants with debt said they currently have a balance on their credit cards, and many also said they struggle to keep up with their credit card payments. Obviously, falling behind on any debt isn’t ideal, but high annual percentage rates (APR) on credit cards — exceeding 20% ​​in some cases — can create long-term financial problems.

If you fail to pay off your balance in full at the end of the month, the credit card company charges interest, causing your balance to swell quickly. Next month you’ll have even more to pay back, and if you can’t, you’ll be hit with even more interest.

This is a huge problem for seniors living on a fixed income, as they may have to dip into what little savings they have to pay their credit card bills. And if they don’t have enough savings to pay what they owe, they may have to go back to work or rely on family members to avoid late fees or lawsuits.

Even if you’re still working, credit card debt can increase your risk of financial instability in retirement because it can prevent you from saving for retirement in the first place. Even if you try to save for the future and pay off your credit card debt at the same time, you’ll probably end up losing money because you’ll be paying more interest than you’re earning from your investments.

How to Stop Credit Card Debt from Ruining Your Retirement

If you have credit card debt, paying it off should be your top priority. When you have extra money, it’s quite simple. You can either make a lump sum payment or use your available money to pay off your debt each month until it’s paid off. But the problem is, most people don’t have extra cash, otherwise they wouldn’t have credit card debt in the first place.

Some people choose to open a new credit card – a balance transfer card. These cards offer an introductory APR of 0% for new customers for a few months before the standard APR goes into effect. During the 0% APR period, your balance will not increase at all, as long as you do not accrue late fees. . So any payments you make contribute to your main balance.

Of course, to do this you still need extra money every month. If you don’t have much to lose right now, you may need to consider working overtime or taking on a side job in order to get the money you need to pay off your debt.

You can also swap your credit card debt for a personal loan. You do this by taking out a personal loan for the amount of your credit card debt and using the money to pay those bills. Then you’ll have a predictable monthly payment that you can repay without worrying about a bloated balance. However, you will still pay interest on what you owe with a personal loan, and it can be difficult for retirees to get a personal loan without some form of income.

If possible, it’s best to take care of your credit card debt before you retire, but if you’re already retired, that doesn’t mean you’re doomed. You should definitely make paying off your debt a top priority, and you may need to retire, at least part-time, until you have control of your finances again.

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