How to Retire Debt Free

by Suzan Bekiroglu

retire debt free"I want to retire debt free."

Who doesn't?

Retiring with no debt has been the goal of generations of potential retirees. By having no debt in the golden years, a person or couple is able to greatly reduce expenses and obligations, making it possible to live on a lot less money or use that money to travel.

You can retire debt free, but it will take some work and sacrifices. Follow these tips to make sure that your retirement begins without any debt.
  1. Create a budget for every year from now until you retire that will take you to retirement. Use your current income as a starting point, but factor in any guaranteed income you will have such as retirement account payouts or Social Security. Include all your bills, making sure that you cover at least the minimum payment on all debt. Then, divide the total amount of debt you have by the number of years you have until retirement, and include this figure as an expense on every budget.

  2. Put all “extra” money toward your debt. Instead of including debt repayment in your budget as a set expense, simply plan to put any bonuses or other non-regular income toward repayment. Making several large lump sum payments will usually allow you to clear smaller bills from your expenses, and you won't notice the difference from month to month because you'll be able to stick to the same budget.

  3. Use your newly freed money to pay off more debt. Every time you pay off a bill, the minimum monthly payment will fall off your budget. Try to devote at least half of this “free” money to making extra payments on your debt. Use the rest to contribute more to your retirement savings.

  4. Refinance your high interest debts. Credit cards and personal loans often come with high interest rates, making it difficult to make real progress towards paying off the debt. Consider refinancing these debts by taking out a home equity loan or transferring the balances to low interest credit cards.

  5. Pay as you go. As you work toward getting out of debt, be careful about not taking out any new loans. Hold off on purchases of new cars or major appliances until you are able to pay cash. Every new loan you take out will be another debt that has to fit into your budget and be paid off before you retire.

  6. Delay retirement. While this is not an option for everyone, being able to work an extra year or two will allow you to have more time to pay off your debts. In addition, the income you bring in will mean getting the opportunity to put more into your retirement savings. If full-time work isn't an option, think about working part-time or working as an independent contractor.
Getting out of debt before you retire is a good goal to work towards. Make a strategy to fit debt repayment into your retirement plan.

©2012 Suzan Bekiroglu Used by permission

Ms. Bekiroglu is a published author, freelance writer and editorial consultant for After receiving a Bachelor of Arts degree from the University of South Florida, she faced the mounting obstacle of paying over $24,000 back in student loan debt. Thus, she became determined to eliminate the debt and very knowledgeable about money management. She seeks to educate others through tips debt, general personal finance, and saving money.

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