Home > 2015 > Managing Debt

How to Retire Debt-Free: A 4-Step Checklist

Advertiser Disclosure Comments 0 Comments

Do you know how much you need in savings to fund your retirement? Are you factoring in your current debts? You may have just assumed that home, car and credit card payments would disappear by retirement but this doesn’t happen automatically. Since pretty much no one wants their post-work living to be focused around bills and stress, one of the best ways to ensure peace of mind is to save aggressively for retirement while also paying off any existing debt before retirement starts. Check out these tips to help you retire without debt.

1. Avoid Lifestyle Inflation

When you start to make more money, it may seem inevitable that you have to spend more on your lifestyle, but this doesn’t have to be costly. If you commit yourself to an expensive lifestyle as soon as you can (or almost can) afford it, you will be more likely to struggle with debt as a senior. It can be a good idea to live well within your means while saving regularly so you can have a comfortable lifestyle without carrying debt into retirement.

2. Prioritize Payments

You can’t necessarily tackle all your debt at once or even in the same way. Credit card debt is likely your first priority as these usually carry the highest interest. Then you can make a list of all other payments from student, home or personal loans to your investment portfolio and savings accounts. You can prioritize these by interest rate or return rate. You can also consider consolidating your debt into a single low-interest monthly payment using a personal loan, but it’s important to weigh the pros and cons of this option carefully.

Debt consolidation loans and balance transfer credit cards will require a credit check. If you don’t know where you stand, you can check your credit scores for free on Credit.com.

3. Assess Your Mortgage

For most Americans, mortgages are the largest debt they carry. If you can schedule your mortgage payoff to at or before your retirement date, that means you have one less (large) monthly expense in retirement. It’s important to remember that some costs, like maintenance and property taxes, will continue even after the mortgage is gone.

You may determine that you would rather hold onto your mortgage into retirement and put more money toward investing. This may especially make sense if you have a very low-interest mortgage.

You may even want to consider downsizing to a smaller home earlier than planned so you don’t miss the opportunity to sell when conditions are favorable and maybe even pay off that mortgage earlier.

4. Temporarily Reduce Retirement Contributions

Obviously you need income in retirement and that requires saving the funds ahead of time, but if you have high-interest debt that you can’t quite cover with your current budget, you may want to consider reducing your retirement savings contribution rate to focus on squashing debt.

This means paying extra on the debt while saving the minimum until debt is paid off. Keep in mind that “minimum” when it comes to your retirement funds should still allow you to meet your maximum employer match. But it’s important not to let debt repayment derail your savings efforts for too long.

More Money-Saving Reads:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team