In fact, 60% of workers said that debt is a problem for them.1 And 68% of retirees with debt reported having outstanding credit card debt.2 Since repaying debt on a fixed income can pose extra challenges, it’s never too early to think about how today’s spending can affect tomorrow’s dreams.
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Will you ever retire?
While some people may plan on retiring at 65, others at 55, and maybe some even dream of bowing out at 40, about one in four workers expects to retire at 70 or older or not at all. Only 14% of workers said they planned to retire before 60.3
Lack of confidence in financial security may be one reason people plan to delay retirement. Nearly one-third (32%) of workers said they are not confident in their ability to have enough money to live comfortably throughout their retirement.1
You don’t have to let these statistics get you down, however. With the right financial planning, you could better position yourself to achieve your financial goals.
How can you save for retirement if you have debt?
When planning your retirement, it’s a smart idea to take control of higher-interest debt. If you take concrete action by paying down higher-interest debt sooner, you can save on interest and may be able to contribute more to retirement savings.
Overall, Americans have an average of $104,215 in consumer debt, including mortgages, student loans, and other borrowings.4 The average U.S. household with credit card debt has a balance of around $6,065.5
There are various methods for attacking your debt. You might consider the snowball or avalanche approach to paying down your outstanding balances. The key thing is to pick an approach that works for you and follow through on it.
Debt consolidation may offer another effective strategy for lightening your load and paying off debt. Debt consolidation means that your various debts, such as credit card bills or loan payments, can be rolled into one set regular monthly payment with a fixed interest rate. This might help you lower your interest costs and budget more effectively, allowing you to save more each month.
Which debt should you pay off first?
As you review any debts you may have, be sure to check how much they are costing you.
If you have a mortgage or student loan, it may have a lower interest rate compared with other types of debt. Mortgages and student loans also have tax benefits that can save you money when paying interest. These types of loans may not be a priority when deciding which debt to pay off first. Check with your tax advisor before you make any changes here.
Other types of debt, including car loans and credit cards, can carry higher interest rates. By focusing on these debts, you may save money on interest in the long term, which you can apply to your savings. Some people may consider a balance transfer to lower their interest payments. But there may be drawbacks, including fees and a low introductory rate that expires.
How much can debt consolidation help?
If you are specifically looking to reduce interest rates from credit card debt, here are three reasons why using a personal loan to consolidate debt may be a smart idea.
- Rates on a personal loan may be lower than the interest on variable debt, so you can pay less on interest. That’s savings you can put toward your retirement fund.
- You can lock in a fixed rate so that your monthly payment won’t change, while other interest rates may rise. Even small interest rate increases can cost you more money on variable rate debt.
- Instead of managing multiple bills, you can plan your budget around having one set regular monthly payment and an end date for the loan.
Our debt consolidation calculator can estimate savings on interest, as well as payoff time, to show you the value of a debt consolidation strategy. You may find that combining balances into a single, fixed-rate loan could benefit you. In fact, 85% of surveyed customers said they saved money by consolidating debt with a Discover personal loan, and nearly half said they saved an average of $428 per month. That’s money you could put towards retirement savings.
How can you plan for the future?
When it comes to retirement, there are many sources you can consult. The important thing is to keep an eye on your long-term goals.
Not everyone can have a perfect financial picture at any given moment—with a budget that allocates exactly what you need for bills, retirement, debt reduction, and emergencies—but it’s never too late to take steps in the right direction.
Whether that’s simply saving money, planning for the long haul, or lowering interest payments on debt, you’re stacking the building blocks in your favor toward the next phase of your financial life.
Ready to check your rate and manage your debt?
