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Retiring Debt When You Retire

Retiring Debt When You Retire

February 22, 2024

Many Americans rely on credit cards for their everyday purchases.  After all, it’s so easy and tempting – that new pair of shoes looks great, and while they’re expensive, you can pay them off over time, you think, barely giving things a second thought as you tap your smartphone or swipe your card for payment.

But these spontaneous purchases come at a cost – interest that accumulates if you fail to pay your charge card bill in full each month. That debt is bad enough at any age, but when you’re facing retirement and need to live on a fixed income, it can be a brutal financial strain.

While you may not be willing to part with your charge card as you reach your Golden Years, there are a few key considerations for using it when relying on a fixed monthly income.

Number one, recognize that not all credit cards are alike.  When trying to decide whether to sign up for a card, think about your intended use. While it may offer an attractive rewards program, if you’re not paying off the balance each month, you could pay far more in interest than any rewards would provide.  Additionally, these cards typically come with large annual fees and even higher interest rates.

Think twice before agreeing to that new card and instead look for a card with a lower interest rate.

Number two, building up a good credit score can help you get a lower interest rate on a credit card.  To improve your rating, just make sure that you pay your bills on time and minimize your debt.  I know, it’s a catch 22 – if you could pay your bills on time each month, you wouldn’t necessarily need a credit card.

And number three – try your best to reduce your debt each month.  While doing away with all credit cards may be impractical, reducing your debt will help keep your finances in order and your fixed income more predictable.

If you need help reducing your debt, please give us a call.  We can help you develop a plan that works for your habits and lifestyle-- that's precisely what we're here for.

-Chad


Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.  This material was prepared by LPL Financial, LLC.