6 Smart Ways to Reduce Debt Before Retirement

Many Australians face carrying debt into retirement, but the good news is that there are simple steps you can take now to manage your debts while you’re still earning. When meeting with new retirement advice clients, part of our comprehensive discussions is understanding your circumstances and gathering important information. It’s often at this stage that the true level of debt for some clients becomes clear, and the potential impact on their retirement is fully understood. Here’s a guide to help you reduce debt and ease into retirement with greater financial peace of mind.

Review and Consolidate Your Debts

Start by taking a close look at your debts and what you owe. Consider consolidating them into one, which can simplify payments and potentially reduce interest rates. Always pay your bills on time to avoid extra fees, and where possible, make full payments rather than just the minimum.

Set a Budget and Stick to It

Establishing a clear budget can help you manage expenses, especially as you approach retirement—factor in your living costs, healthcare, and even recreation. Planning for decades of retirement is crucial, so think about how much you’ll need to maintain your lifestyle.

Maximise Your Income Sources

The money you’ll use to fund retirement will likely come from super, investments, savings, and possibly the Age Pension. Make sure you understand your super balance and consider consolidating accounts to reduce fees. Know what other funds you’ll have access to, such as investment property or savings, and plan accordingly.

Be Strategic With Your Money

Think about where your money is sitting and whether it could work harder for you. For instance, using an offset account linked to your mortgage or looking at different investment options inside your super could increase your income. As you near retirement, you may want to shift to a more conservative approach to reduce risk.

Downsize or Refinance Your Home

Downsizing your home can free up funds to boost your retirement savings. If you’re over 65, you could contribute up to $300,000 tax-free into your super from the sale of your home. Refinancing your mortgage could also offer lower rates and greater financial flexibility.

Consider Working Longer

Extending your time in the workforce can boost your savings and super balance, ensuring a more comfortable retirement. Many older Aussies choose to work longer for financial security, and retirement doesn’t always have to be a one-time event—many return to work in their later years.

Preparing for Retirement: Your Income and Debt

As you plan for retirement, it’s essential to not only understand your expected retirement income but also the debt you’ll be carrying. Creating a retirement plan that fits your goals and financial situation is key to retiring comfortably. Spend time with a trusted retirement planning team to ensure you’re set for success. Reach out to our team today to discuss how we can help you retire right.

For help reducing your debt, contact our team here.