Whether it is good debt or bad, controlling your family’s debt can make a big difference when it comes to preparing for retirement.
Setting aside money for your future can be a smaller financial mountain to climb if you can live off less money. A key to making a smaller budget can be to eliminate as much debt as possible, so you can focus your funds on current needs, not past debts.
Getting to that point in your financial journey involves the discipline to stick to the plan and the vigilance to track the steps to accomplish on the way to less debt.
Debts not equal
Some debts will hurt more than others as you ready for retirement. Here’s potential debts and how you could attack them:
CREDIT CARD DEBT: This is considered the first debt a consumer would want to eliminate for two reasons. Generally, credit cards carry high interest rates. Another reason to pay off credit card debt is to give your budget room to grow.
VEHICLE LOANS: While the interest rate can vary greatly with vehicles (with some interest rates nearly zero), the depreciation of the vehicle is still a cost that can make the payments harder to swallow after the new car shine wears off.
STUDENT LOANS: If you are helping your kids or grandchildren pay for college, it can put a crunch on your ability to save for retirement. Most people today are putting twice as much money into funding a retirement compared to a college education and with good reason. There are limited ways and time to fund retirement. Funding a college education can be done with grants, scholarships, loans, 529 plans or a job. The funding can also be paid back over a number of years.
MORTGAGE: Of all debts, this is the one that is most likely to have some tax benefits in retirement. Interest on a mortgage is tax deductible, but the amount of interest you are paying is less than when you started the loan.
OneAmerica Financial is the marketing name for the companies of OneAmerica Financial. Non-registered group annuity contracts are issued by American United Life Insurance Company® (AUL), a OneAmerica company, One American Square, Indianapolis, IN 46282, 1-800-249-6269. Group annuity contracts are issued by AUL and registered variable annuity products are distributed by OneAmerica Securities, Inc., a Registered Investment Advisor, Member FINRA, SIPC, One American Square, Indianapolis, IN 46282. Not available in all states or may vary by state. Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice.