Finance Attitude | How debt can affect your retirement

/Lydia Wanjiru/ -- Are you financially prepared for your retirement? Making the right financial decisions now is the first step to a financially secure future. A good investment plan requires having good financial habits like saving and paying off your debts on time. Debt can have a huge impact on your senior years if left unsettled when you are still working. Debt may be necessary and can sort you out at some point in life. While it may be necessary to take out a loan like a student loan to finance your further studies, a loan to finance your home or your vehicle, credit cards among others, it is also important to make sure that you pay it off before you retire. Avoid procrastination and try as much as possible to settle your dues before you retire. If you are still in debt when you retire, it can ruin and derail your plans for retirement. Here are 3 ways debt can affect your retirement:

1. It may cause you to extend your retirement date

When you are working, it is easier to contribute towards debt repayment. But if laid off, it can become very difficult to raise the money needed to pay off your debts. If you don’t settle all your debts when still employed or working, you may be forced to extend your working years to afford the cash you need to pay your dues. It may also be difficult to secure a job in your senior years if you are laid off in the job you have. Try as much as possible to pay all your debts before you retire to avoid such a scenario.

2. It will decrease your retirement savings

Retirement savings is the money you set aside to meet your needs after you retire. You will have to use some of your retirement savings to settle your outstanding debts. This will reduce your savings and you may not be able to meet all your retirement plans. While some debts may be easier to repay even after you retire, being debt-free is the best decision so at to enjoy finer things in life. When you retire, you have more free time and you can spend your time traveling to your dream destination or doing the things you have always wanted. Avoid as much as possible to accrue debts when you are approaching your retirement age. If it is inevitable to get into debt, consider finding extra sources of income to help you repay it before you retire. The amount of debt you accumulate when younger can also have a major impact on your senior years as you may end saving less money for your retirement. This means that you may end up not having adequate savings to cater for all your needs when you retire.

3. It will cost your peace of mind

Debt can heavily weigh down on anybody’s mind at any age. Debt collectors can also be quite nagging and to deal with them in retirement is even more frustrating. Their endless calls and reminders can cost you your peace of mind. Avoid being in debts to enjoy your life as a retiree.

The financial decisions you make now have an impact on your future. To create a solid future and to be financially stable in retirement, start planning and investing for it as early as possible.