If retirement is on the horizon, but you're concerned about how your debt may affect your future quality of life, you're certainly not alone. According to Allianz Life’s 2024 Annual Retirement Study, this is a worry shared by 40% of Americans. Many are left wondering whether it's wise to opt for debt relief before retiring.
On a positive note, becoming free from debt can offer a liberating experience. However, certain forms of debt relief could negatively impact on your credit rating, and restrict your qualification for prospective financing. An excellent initial move is to have a complimentary session with a credit counselor. This can provide a comprehensive understanding of your financial state and potential pathways.
Ideally, entering retirement without debt is best, yet this remains unachievable for a lot of individuals. Deciding on whether to proceed with debt relief, and what form of relief to opt for, is dependent on your circumstances and the nature of your debt.
Typically, priority should be given to clearing high-interest debts such as credit card balances in advance of retirement. The rapid growth of this type of debt due to substantial interest charges can make it difficult to handle. Rising balances can deplete your retirement fund, subsequently reducing your standard of living. Thus, if you hold sizable high-interest debts like credit card balances, exploring debt relief could be worthwhile. You can access free assistance and explore all available options.
There are several methodologies to alleviate debt, including credit counseling, debt settlement, and bankruptcy. Bankruptcy is typically considered by those facing severe financial strains, however, it might be favored over debt settlement, due to the latter's high fees. Each method of debt relief has its advantages and disadvantages.
Nevertheless, engaging with a credit counselor usually has lesser impacts than debt settlement or bankruptcy, although it necessitates repaying the entire debt over time. Besides the above-mentioned strategies, there are additional debt management options available, such as debt consolidation loans. If debt is obstructing your retirement savings plan, then taking advice from a credit counselor could be beneficial. Simultaneously, strive to improve your financial health in other ways. Analyze your budget to spot any potential reductions, allocate any unexpected income towards your retirement savings, and consider adopting a side gig in line with your hobbies.