Of all the financial decisions that you make, being smart about your debt level is among the most critical. To stay solvent, particularly in retirement, do your best to pay down as much debt as possible so your income can go toward what you want to do instead of what you need to pay off.
1. Wipe Out Your Debt
If your house is paid for, congratulations. If it’s not, consider making some big but necessary changes. For example, you could sell your home and buy something smaller, or buy something that will help you cover the bills. For example, you could take what you’ve made off the first house and buy a duplex or a twin home.
If you choose to buy a duplex and live in one half, you have a lot of flexibility. For example, you could get a lower payment at a longer-term. If the payment is low enough, the banks will be happy with this choice, because your neighbor will be paying the mortgage for the life of the loan. If you can afford a duplex or twin home outright, you can enjoy the rent payments as income, deduct the mortgage interest, and take depreciation of a portion of the property.
2. Prepare to Live More Simply
Another benefit of selling a larger home is that you can find a place that’s all one level. As we age, vision and balance can start to fail. It only takes one fall with a laundry basket to radically change your retirement. If you can get laundry set up near the bedrooms in your current home, do so. If you can’t plan for it in your retirement place.
Additionally, another reason to relocate and/or downsize relates to your utility bills. In a smaller home, you can more easily live within your means. Finally, a new home may mean a maintenance-free exterior, which can make life much safer and simpler.
3. Carry Enough Insurance
In addition to health, car and life insurance, it’s a good idea to look into long-term care insurance. While the world of long term care is expanding quickly and getting better for those who want to age in place, discussing your future financial needs with a professional who knows the risks and offers expert pensions advice would be a wonderful use of your time.
If you know you’re going to need physical support and care soon, look into retirement spaces that start with apartments and allow you to transition to more skilled care. Not only can they save you retirement dollars, but these facilities will reduce your outdoor maintenance worries to zero.
4. Reduce Your Dependents to Zero
If you have children, siblings, or grandchildren who constantly come to you for financial support, it’s time to have a tough conversation about getting them off your payroll. Your retirement time and dollars are yours; you’ve earned them. Your family and friends need to either pay their own bills or find another source of income.
In some cases, this may damage the relationship. If you have to pay a child or other family member to be pleasant to you, the relationship was not in great shape originally. If you want to seek family counseling, be prepared to pay for it. However, don’t limit your retirement because of other people’s financial troubles.
5. Consider a Radical Housing Change
For the more adventurous, it may be time to make a big change. There are many pensioners who have made a radical housing change. They have
- gone mobile, such as in an RV
- gone international, such as to an ex-pat community in Asia, or South/Central America
Not only will one of these radical changes really shake up your world, but there are many who’ve made this change that has found that their cash goes much further, they have the energy and the time for a second job, and their joy in life is greatly improved. Consider this move carefully, but do consider it, especially if your retirement funds are very low.
As the baby boom generation approaches retirement, they will put pressure on existing systems, and those systems will have to change. For your peace of mind and general comfort, do your best to learn to live within your means before retirement. Wipeout debt to the best of your abilities, and be ready to make big changes if you’re strapped for cash.