The Importance of Managing Debt as You Near Retirement

by Gary Foreman

Managing Debt as You Near Retirement photo

Too much debt can ruin all your hard retirement planning and saving. We speak with an attorney who specializes in debt issues about what you should do to prevent debt from interfering with your comfortable retirement.

Are you approaching retirement age and still in debt?

Many in their 50s and 60s have spent years accumulating debt. Others have tried to reduce the amount they owe but haven’t managed to repay everything they owe. The amount of debt you have going into retirement can have a critical effect on how financially comfortable your retirement is.

To help us understand what people in their 50s and 60s can do to control and repay debts, we spoke with Leslie Tayne. Ms. Tayne is an attorney specializing in debt issues and writes frequently on the subject. She authored Life & Debt: A Fresh Approach to Achieving Financial Wellness.

Q: Are there many people nearing retirement that are still in debt?

Ms. Tayne: Many people are nearing what is considered retirement age but are not retiring because of debt or the amount of expenses they currently still live with on a day-to-day basis.

Q: Why is it important to manage debt as you near retirement?

Ms. Tayne: It’s super important because it is likely that once you retire, your income is going to go down from where it is now and then stay the same, meaning you likely won’t have increasing income. It will be a fixed amount, and therefore eliminating as many expenses (especially debt payments) as possible will be a huge benefit and relief.

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You deserve a comfortable retirement.

Subscribe to After 50 Finances, our weekly newsletter dedicated to people 50 years and older. Each week we feature financial topics and other issues important to the 50+ crowd that can help you plan for a comfortable retirement even if you haven't saved enough.

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Q: If someone struggled to get out of debt unsuccessfully for years, how can they change and be successful now?

Ms. Tayne: The best advice I can give is to change your ways financially by using a debit card or cash instead of credit, work on a budget, and just say no to unnecessary purchases. You need to look at the root of the problem in order to make a good financial change.

Q: Are all debts equally troublesome? Or are some more dangerous than others?

Ms. Tayne: Some debts are more problematic, especially the ones you can’t pay! I say this because some you can pay comfortably and some you can’t.

When you can’t pay a debt, most people seem to hope it’ll work it out either by paying it for a long period of time or transferring it around with a lower interest loan or a balance transfer. However, this debt will most likely become a problem.

Q: Should you use retirement savings (like 401k and IRA’s) to pay off debts before retirement?

Ms. Tayne: I am not a fan of this and usually steer clients away from using hard-earned retirement money to pay off debts. It usually causes more issues than it resolves since you are depleting savings that you can’t make up because of time left working and you could end up with a tax-related debt from taking it out early. Also, you don’t solve the underlying issue of cash flow and now have left yourself with nothing to fall back in case of an emergency.

Q: Are there any tools or techniques that are available to reduce debt at this stage of life that aren’t available otherwise?

Ms. Tayne: There are so many. Don’t be afraid of a computer and programs to help budget. I also suggest you seek out professionals who specialize in managing debts, not just managing money and investments. Talk it out with family and significant others and be on the same page about financial habits and goals. Stop spending and look to reduce non-necessities. I am not preaching to cut your lifestyle in half, but to take a look at it and see what’s most important for the next years or stage of your life.

Will Debt Derail Your Retirement?

One of the most important ingredients for a comfortable retirement is to be debt free when you retire. This simple checklist can help you find out if debt could derail your retirement.

Reviewed October 2020

About the Expert

Leslie Tayne, ESQ., is an award-winning and highly respected consumer and business debt-related attorney and advisor and founder of Tayne Law Group, P.C., one of the few in New York State concentrating solely in debt resolution and alternatives to filing bankruptcy for consumers, small business owners, and professionals. An expert blog contributor for Credit.com and author of best-selling personal finance book Life & Debt: A Fresh Approach to Achieving Financial Wellness, Leslie has also penned articles that have been featured by noted news outlets such as FoxBusinessNews.com, Money magazine and Yahoo! Finance.

About the Author

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com. You can read Gary's full bio here. Gary shares his philosophy of money here. Gary is available for audio, video or print interviews.

You deserve a comfortable retirement.

Subscribe to After 50 Finances, our weekly newsletter dedicated to people 50 years and older. Each issue features financial topics and other issues important to the 50+ crowd that can help you plan for a comfortable retirement even if you haven't saved enough.

Debt ChecklistSubscribers get The After 50 Finances Pre-Retirement Checklist for FREE!

Your Email:

You deserve a comfortable retirement.

Subscribe to After 50 Finances, our weekly newsletter dedicated to people 50 years and older. Each issue features financial topics and other issues important to the 50+ crowd that can help you plan for a comfortable retirement even if you haven't saved enough.

Debt ChecklistSubscribers get The After 50 Finances Pre-Retirement Checklist for FREE!

Your Email:

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