Consolidating credit card debts should be a priority for most people – especially those who are about to retire. It can be very stressful for pre-retirees because they have to think about saving for their upcoming retirement while making sure that debt does not follow them into it.
Based on recent reports, 1 out of 3 Americans who are 50 years and older have non-mortgage debts. To be specific, they have an average of $4,786 worth of credit card debts. If you include the other types of debt (excluding mortgage), the average debt of pre-retirees become $12,490.
Among all the other types, getting rid of credit card debts should be a priority. It is notorious for having a high-interest rate. If left unpaid, the finance charge can quickly make your balance grow. That is the last thing that you want to happen because having a lot of debt in retirement is never a good thing. This is why if you have debts you need to think about consolidating credit card debts with other accounts that might threaten your retirement money.
Ways consolidating credit card debts help pre-retirees
Fortunately, retirees are aware of the dangers posed by debts in general. According to one report, 4 out of 10 retirees are putting “debt payments’ as a financial priority. It is considered as one of their top concerns alongside trying to get by with enough money for basic living expenses. Of the people trying to pay off debts, 3 out of 10 are focusing on credit card debts – and there is a good reason why this is a good choice.
If you are looking for the best option to pay off this type of debt, you can consider debt consolidation. This is the perfect solution for those who want to put their finances in order before they retire. Consolidating credit card debts is ideal because of a couple of reasons.
Lowers the interest rate
First of all, it can lower the interest rate of the debt you are paying off. Usually, consolidating debts involve opening a new credit account. This is your chance to have the repayment plan that perfectly suits your current financial position. That means you can choose a loan that has a lower interest rate than the average of your credit card debts. If you have a good credit score, this will be easier for you to accomplish. With a lower interest rate, you can save a lot of money on the overall amount that you will pay towards your debts.
Gives you the option to shorten the repayment plan
Since consolidating credit card debts allow you to restructure your repayment plan, you can also opt to shorten it. For those who are about to retire, it makes sense to consolidate debt if it means getting out of debt faster. This is especially true if you have limited retirement funds. If you have to share that with your debt payments, your basic necessity expenses might suffer. It can compromise the quality of life that you should have been living. So if you can get rid of it, you want to opt for the fastest option for you to achieve freedom from debt.
Makes debt relief easier to manage
Finally, consolidating credit card debts can make your debt payments easier and more convenient. With debt payments simpler it is easier for pre-retirees to focus on other things – like earning more to increase their retirement fund. If the time to retire is upon you, it is a must for you to work harder to prepare for it. The best way to do that is to save money for your retirement. The more you have in your fund, the more comfortable and secure you can be.
Why credit card debts should be gone by the time you retire
Debt, in general, should not have a place in your retirement. But most of all, credit card debts should be the first one to go. Fortunately for you, the effects of debt consolidation can last a long time. But you need to work for it. You have to remind yourself to stay away from more debt. Once you have achieved debt freedom after consolidating credit card debts, try to keep it to stay that way. It can be easy to fall into another credit card debt trap. However, if you understand how it can affect your retirement, you might find it more motivating to be wiser with how you use your money.
Here are some of the reasons why you need to keep a lid on your credit card debts.
It might force you to keep on working
This is only true if you do not have enough retirement funds. Your debt situation will force you to keep on working. When you fail to pay off your debts, it will go to collections. Soon, you will have debt collectors pestering you to pay off what you owe. It can cause a lot of stress. If you do not do something about it, you might end up feeling ill. This is why a lot of people just opt to postpone retirement until they have paid off their debts.
It can compromise your limited retirement fund
Another effect of debt in retirement is in your lifestyle. It can really compromise the standard of living that you have dreamt of for your retirement. If you have to share your retirement fund with debt payments, that can really force you to sacrifice a lot. You need to make sure that debt will not threaten the quality of lifestyle that you will enjoy.
It can add stress to your life
If you do not do something about your debts, it will start to feel very stressful. Prolonged feelings of stress can end up making you feel ill. If having debts is not bad enough, being ill as you enter retirement is even worse. This is why consolidating credit card debts should be dealt with as soon as possible. The sooner you start, the faster you can enjoy debt freedom as you enter retirement.