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3: Analyze Your Decisions

The Debt Effect

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Take a Guess

What do you think is the average debt for someone approaching retirement?

  • $10,000
  • $25,000
  • $100,000
  • $250,000

According to the Social Security Administration, the average debt for near-retirees, including housing debt, is over $100,000.

When you are working, it is likely that you handle your debt with a steady income stream. You may have to budget and make payments on a regular basis; you may even incur additional interest costs if you can’t pay a bill in full. However, if you make your payments on time each month and monitor your spending, you can maintain your credit rating for future credit needs.

All that changes when you retire, and there may be a reduced income stream.

  • If your retirement savings for are used to service debt, you are basically borrowing from your future self who may need that income down the road.
  • Your debt can decrease your accumulated financial assets and savings, lessening potential earnings from these assets.
  • Your retirement lifestyle is more restricted with debt since you will have less disposable income available for your retirement pursuits.
  • Debt can cause physical symptoms of stress, impacting your health and lessening your sense of well-being, increasing costs of medical care and leading to despair.
  • Without significant assets that generate good earnings, you may have to return to the workforce.

With its impacts on your retirement lifestyle, it’s easy to see why you might want to pay down debt before you retire.

SAM tips

Need Help with Managing Debt?

SAM’s Money Basics Credit and Debt course covers strategies to reduce and manage your debt load.

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