Getting Out of Debt in Your 50s and 60s
Up until recently, retirement was a fairly straightforward process. You got a job, stuck with it for years (often until retirement), got married and had kids, bought a house – not necessarily in that order. The thought was you followed a trajectory and got to live out your golden years comfortably.
Since those days, the economy and culture have changed markedly. Technology has advanced rapidly, jobs have moved overseas, the population has grown exponentially, and a number of other things have changed the economic and cultural landscapes.
A look at a cumulative cost of living chart shows that the cost of living has gone up 2463.50% since 1913. Additionally, wages have stagnated for many. This imbalance has created an increasing amount of debt, and it’s seen across all ages and socioeconomic classes.
While you may want to focus on the factors, or hows and why’s, it’s more crucial to look at ways to get out of debt. This is even more essential for those in their 50s or 60s. In other words, for those who are about to or have just retired and still find themselves in debt.
The Golden Years are coming later
People are living longer, and also working longer. Part of the reason for staying in the workforce is to reduce debt before retiring. That said, there aren’t always the same options for reducing debt, especially if you are accruing more due to medical bills, rising taxes, or anything else that may affect your ability to pay down and save.
How to pay down debt in your 50s and 60s
Hopefully in your 50s and 60s you’ve gotten somewhere. Maybe you have a house or two, cars, a lifetime of household items. Maybe you’ve maintained great credit, or you’ve worked your way up the company ladder. Use these things to start focusing on your debt, and boosting your retirement savings.
Here are some ways you can approach your debt:
- Start by paying off credit card balances – Credit card fees and interest rates will eat into your income quickly. Focus on paying those balances down or off as soon as possible.
- Work on your loans – The next step is to focus on loans; either to pay them down or eradicate them (you'll want to keep tax deductible loans if it helps your finances). Work on those with the highest rates first and go from there. If you don’t need two or three vehicles, downsize your fleet, especially if you have multiple auto loans. Any loan you can pay off or get rid of will go a long way to setting you up for retirement.
- Don’t add new debt – Avoid anything that adds more debt in your 50s or 60s. The goal should be retirement.
- You shouldn’t have any collections – If you have collections or negative marks on your credit, take care of them right away. Negative marks take their toll on your credit score and interest rates.
Some smart financial moves you can make to save money in your 50s and 60s
An excellent budget, adding to savings, and reducing or cutting costs are going to be your primary focus in your 50s and 60s. All of these things help with debt reduction as well.
Make these smart financial moves:
- Create a budget that allows you to save and pay off debt each month. Once something has been paid off (debt-wise), move that money to your savings each month.
- Downsize anything you can. Find a more affordable home, get rid of anything you don’t need (sell it if possible and use that money to pay down debt).
- Consider debt consolidation. If it helps reduce interest rates and makes payments easier, then debt consolidation is a valid option. However, it's best to talk to a professional before making this choice.
- Cut costs by reducing the amount you eat out, canceling unused subscriptions, finding the most affordable plans and services, and using senior discounts. Look closely at what you need, what you want, and how much you spend on luxury items. Find a healthy balance in your spending.
- Keep a part-time or work-from-home job. You can keep side gigs to help with debt and savings, and still have time to enjoy life.
Getting rid of debt in your 50s and 60s is more important than ever. The choices you make will affect how golden your golden years are.
Equal Housing Lender