Federal employees enjoy one of the greatest retirement benefits packages in the country. After your years of service are finished, you will hopefully have enough retirement income to live securely for the rest of your life.
However, your spending is also a big part of that equation. Money only goes so far, and if you carry a large debt load into retirement, you could find yourself dissatisfied with your lifestyle. That’s why paying off your debts, even if you have to work a few more years, is one of the keys to a successful retirement.
Your mortgage. If you’re like most people, your mortgage is your biggest debt. Paying it off before you retire could give your budget significantly more room. There are a variety of strategies to accomplish this goal, such as putting your income tax refund toward the principle every year, paying extra each month, or refinancing to a mortgage with a shorter term.
If you can’t pay off your home entirely before retirement, selling it and paying cash for something smaller and less expensive is another good plan. You might prefer something with less yard work and housekeeping, anyway.
Credit cards. After mortgages, credit cards are the largest source of debt for most American households. If you only pay the minimum payment each month, it could take decades to pay off the balances! A low-interest loan might be your best bet to pay them all off before you retire. Just remember to stop using credit cards, except in emergencies, or you might run up another large balance.
Auto loans. Once you retire, you won’t be making your daily commute anymore. You might consider whether you and your spouse really need two vehicles. Switching to just one car payment – or none at all, if you plan carefully and pay off a reliable vehicle before retirement – will free up hundreds of dollars per month.
Medical debt. It’s important to pay down debts before you retire, but when it comes to medical debt, this is something to watch throughout your retirement years as well. Remember that you can often negotiate your medical bills, so make phone calls before you write any checks.
For more information on your retirement benefits and managing life on a fixed income, give us a call. We work with federal employees to him them plan successful retirements.
