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Welcome back everyone. In the sixth and final part of my blog series, I want to discuss something that affects all of our financial journeys: Superannuation. Perhaps you’re concerned about your retirement savings? Or maybe uncertain about how to make the most .....
Wealth - 3 min read
Current surveys show that the average Australian retires with $50,000 in debts. As people calculate how much they need to save for retirement, they don’t usually calculate debt repayments as anticipated expenses, and yet, managing debt will be a reality for many Australians during their later years.
As you look ahead to retirement, what are your options regarding debt?
According to most experts, the best thing you can do for your future financial stability is to pay off your debts prior to retirement. As you pay off your debts, you reduce your future financial obligations and open up options for how you’ll use your money during retirement.
The most effective way to pay off your debts is to make a list of all of your debts from highest interest rate to lowest interest rate. Pay the minimum monthly payments on all debts except for your highest-interest debt. On your highest-interest debt,pay as much as you can until it’s paid off. When that debt is paid off, move to the next highest-interest debt. This way, you’ll tackle your debts in the most efficient way possible, and you’ll feel your burdens lifted each time a debt is completely eradicated.
If you don’t plan on paying off your debts before you retire, you’ll want to think about how you can stop incurring additional debts in the future. Start tracking how much you spend each month, and look for areas where you can reduce your spending. Create a budget to help you reduce spending during retirement so you have enough to continue making payments on your debts.
If you want to start retirement with a clean slate and no debt, you may want to consider paying off your debts with a lump sum from your super. Depending on how much debt you have, this can take quite a chunk of your super, which reduces your future earnings on your savings. On the other hand, you will save a lot of money on debt interest, which you would end up paying later with funds from your super.
Repaying debt is not the most exciting topic to think about, but if you face it head-on, you’ll find yourself in a much better position. A financial adviser can help you create a personalised plan that will help you manage your debts now in a way that will offer you more freedom at retirement. Feel free to reach out.
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