The quick answer to the question, should I carry some debt into retirement is no, if you can avoid it. Obviously who would want to knowingly carry debt into retirement, however, there are lots of people that are retired and are carrying some debt. Whether it is credit card debt or a line of credit, it is another monthly payment that must be made and depending on the interest rate it can also be very expensive. Credit cards carry interest rates of 21% or more on any unpaid balances. Even unsecured lines of credit can be expensive. They typically are higher amounts and the interest rates are higher as well for anything that is unsecured.
Why You Might Answer Yes to the Question, Should I carry some Debt into Retirement
Sometimes life just gets in the way. The best-laid plans are foiled by early retirement. People get laid off from their jobs, are forced to retire early because of health or downsizing. If you find yourself in this situation and you still carry a mortgage, chances are you will carry it into retirement as well.
Many people decide to go on trips when they retire. Some will spend money on the house to freshen it up. There are many ways to spend money and if we are not careful it means we carry it into retirement as debt.
Debt in retirement does not always have to be a bad thing. Obviously we would prefer not to have any debt. Manageable debt that is declining over time through monthly payments is okay. Debt that is used for investments is obviously higher risk, but it can have a tremendous payback.
For most people, if you have debt, try to repay it as quickly as possible. Pay down the highest interest rate debt first. Renegotiate your debt to arrange for lower interest rates and fewer fees. Avoid missing payments. If you must, downsize your home and expenses to focus on reducing your debt as quickly as possible. Avoid spending money that you do not have. Prepare for the day when an emergency will eat up a lot of your savings.
For more about debt reduction in retirement, click here.