Retirement Planning

Paying Debts and Planning for a Secure Future

As you focus on addressing credit card debt and related financial obligations, it is important to keep in mind the need for retirement planning to ensure you have a secure future. 

Retirement planning can be a challenging and stressful process, especially when  paying off debt is your top priority. Yet, it needs to be a key consideration while you tackle your financial issues.

retirement plan

As people look to retirement, they are typically fearful about not having enough money saved to live comfortably for the rest of their lives. They worry about whether they can maintain their lifestyle, afford their current residence, and cover medical costs. You might find yourself increasingly concerned about these issues as your retirement approaches.

The conversation about retirement planning becomes more difficult when there is credit card and other debt involved. Knowing where your retirement finances stand in relation to your debt – and having strategies for affording unexpected expenses – is crucial for enjoying the later years of your life.

The U.S. Bureau of Labor Statistics recently found that the average American spends $45,000 annually during retirement. Considering Americans put away $200,000 for retirement on average, most people will quickly exhaust their savings. Even with supplementary income from Social Security and other programs, many people may outlive everything they saved. If you have significant debt, your ability to save and have adequate funds for the future is further at risk. For these reasons, it is important to establish a retirement plan and continue to revise your strategies as you age.

Retirement Planning Resources

Fortunately, there are a variety of resources to assist you at every step of retirement planning, including the following.

Free Online Tools: If you want to take charge of the planning process, there are free online resources and retirement planning tools available to consumers. For example, a valuable tool to determine how well prepared you are is the RetireScore calculator. While there are numerous “retirement calculators” available online, only RetireScore combines information about your finances and health status.

These two pieces of information must be considered together to paint an accurate picture of your retirement future. For example, you might enough money saved for 13 years, but a life expectancy of 25 years. RetireScore will report whether your savings and monthly benefits will protect you for all of your retirement years.

Tools like RetireScore can also help you better understand how your debt is impacting your retirement and allow you to make more informed decisions regarding spending and saving.

Educational Seminars: In many locales, there are free seminars that you can attend to glean information about retirement planning. At these events, you may hear presentations from financial professionals and receive varying types of information on planning steps and resources. These seminars are often sponsored by employers, financial institutions, or other community organizations. 

One-on-One Professional Counsel: You may opt to hire a personal financial advisor who will develop a detailed retirement plan for you and then help you manage it, if that is of interest. You will pay the advisor a fee for his or her services, which always should be agreed upon prior to beginning the working relationship.

Ways to Increase Your Retirement Funds

There are many avenues to secure your retirement finances. The following provides options for growing your funds, if you think your savings alone may not carry you throughout retirement. 

Sell Your Life Insurance Policy: For some retirees, life insurance premiums are a burdensome expense that can increase as you age. Many people don’t realize they can sell their life insurance policies for cash, often for much more than the surrender value. Life insurance is a piece of property, much like your home, and you can sell it through a process known as a life settlement. In this transaction, the life insurance policyholder sells his or her policy to the buyer, known as a provider. The provider then continues to pay the premiums on the policy.

This benefits the policyholder in two ways. First, he or she receives money immediately that can help pay for home costs or other expenses. Second, the policyholder no longer has to worry about paying premiums.

Surprisingly, many people allow their policies to lapse because they are unaware of this option. Annually, 250,000 policyholders lapse on their payments, missing out on an average of $51,300 each.

Selling your life insurance is a great way to cover future expenses and receive immediate cash to help diminish your credit card debt. With the average payout of $50,000, you can greatly reduce any outstanding payments and stop worrying about affording increasing premiums as you age. Put simply, pay off debt now, save money later.

Reduce Expensive Monthly Payments: Your monthly costs determine whether or not you will outlive your retirement savings. A great place to start reducing your payments is on phone and television bills. Instead of expensive cable subscription, consider switching to a streaming service or just a basic cable package. These savings can be over $1,000 a year.

If you have a comprehensive phone plan you don’t fully take advantage of, look into cheaper options. For example, Boost Mobile and Cricket Wireless offer comparable services to major providers but typically cost significantly less.

Other than entertainment and communication subscriptions, investigate what else you pay monthly and determine if it is worth the price. Many peoples’ debt stems from overspending on entertainment, so finding ways to cut these costs will help you gain control of your debt. 

Downsize to a Smaller Home: For most people during retirement and in the years leading up to it, their largest cost is their home. Mortgage costs, heating/cooling bills, property taxes, and general upkeep cost thousands of dollars annually. Many people also live in homes they raised families in, so houses often have unused rooms. Downsizing to a smaller house can be a good decision for some people, particularly if you can easily sell your home and are able to endure the moving process.

Emergency repairs and unexpected home payments can be challenging to afford on a retirement income and can cause homeowners to fall deeper into debt. By downsizing to a smaller home, these expenses are often fewer and farther between, allowing you to manage any outstanding debt and prevent it from growing.

Incremental Income Opportunities: Even if you decide not to sell your house, there are still options to earn extra money through your home. Consider renting out rooms to tenants and travelers. Websites such as AirBnB and Spareroom allow you to rent you spare rooms out to travelers and full-time tenants.

It is important to save as much as possible for retirement – and remember that there are ways to improve your retirement finances, even after you have left the workforce.


This article was written by Felix Steinmeyer, CEO of Mason Finance Inc. of San Francisco. He is a licensed life insurance settlement provider, member of LISA and received his MS and MBA from Stanford University.

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