Avoid Freedom 85 - Tips to Retire Debt Free

By Julie Jaggernath

High consumer debt levels, possible interest rate changes at any time, historically low savings rates and talk of pension changes in Canada; the message is that Canadians need to change how they plan financially for retirement. Or more accurately, many people need to stop putting off actively planning for retirement.

Canadians have consistently reported that they are worried about how they’ll deal with their debts once they retire, so many are looking at if and when they can afford to retire completely. Polls have also found that respondents:

will be working at age 66 because they need to
are worried about debt in retirement
reported having difficulty controlling or managing debt

How to retire debt free. If you’re at least 5 – 10 years before retirement and you’re wondering if you can afford to retire, now is the perfect time to deal with your debts and get out of the habit of relying on credit.

Tips to Make Retirement Debt Free

Start planning as early as you can

Pay off your credit cards, lines of credit and overdrafts. Carrying debt into retirement will limit your ability to stop working, to travel, to help your kids with your grandkids, and to manage health related costs. Right now interest rates are still low. Before they go up, look at what you can do to take advantage of the economic uncertainty and guarantee yourself some good results.

Plan to actually pay off your mortgage

Mortgage refinancing has become all too commonplace. You can’t go on refinancing your home indefinitely and when it’s no longer an option, it becomes a real possibility that you’ll be forced to sell your home. Avoid worrying that you’ll be faced with this decision by establishing a budget that lets you repay your debts before you retire, meets your routine monthly expenses and sets money aside for later.

Consider your lifestyle

Look for ways to spend on what’s truly important to you, not just to keep up with the Jones’. Avoid all-or-nothing choices. Spending, budgeting, paying off debt and planning for the future is best done with a balanced approach.

Related: Tips to Make Saving Easier

Share your plan with your family

If your kids depend on the bank of mom and dad, help them understand your decision to live within your means. They’ll appreciate it later when they don’t need to become your financial lifeline.

Sometimes it can be easier said than done, so if you don’t know where to start with building a budget that helps you plan for retirement, contact a financial planner who specialized in helping clients like you, or a non-profit Credit Counsellor (many of them are budgeting experts).