3 ways to pay off debt in retirement

Have you saved for retirement but the bills keep piling up? Are you finding it hard to meet a minimum monthly payment? You're not alone. Retirement planning isn't easy, especially given the current economic climate.

Debt among American seniors is on the rise. According to Policy Genius, the total debt among American seniors aged 60 to 69 measured $2.4 trillion in 2019. Seniors over 70 hold an additional $1.5 trillion in debt. Those numbers will undoubtedly have an effect on the estimated 73 million Baby Boomers looking to retire in the near future.

While retiring with debt may seem complicated, there are ways to prevent various types of debt from ruining your life.

How do you pay off debt in retirement?

1. Refinance your mortgage
2. Get a debt consolidation loan
3. Get a balance transfer card

1. Refinance your home

One silver lining to the coronavirus pandemic is the record low loan refinance rates. With that in mind, if you still have mortgage debt, there's a good chance you may be able to take advantage of the current low interest rates by refinancing your existing loan. A loan refinance could lead to a more favorable interest rate, lower monthly payments, and more perks that could help in terms of paying down debt.

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Remember, when you refinance your mortgage, you're essentially using a new loan with better terms to pay off your old one. Ideally, those better terms will allow you to secure a lower monthly payment.

The caveat, here, is that if you do manage to save money thanks to these low interest rates, you should use the savings to pay off the debt. Additionally, you also can't forget about closing costs, which are mortgage fees that come with taking out a new loan. You'll need to plan to pay for those costs along with your existing debts.

2. Take out a debt consolidation loan

On the other hand, if you own your home outright and can't take advantage of the low mortgage refinance rates, you may benefit from taking out a debt consolidation loan. A debt consolidation loan is simply a personal loan that is used to pay off your existing debts and combine them all into one monthly payment.

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In addition to allowing you to streamline your finances, another benefit of a debt consolidation loan is that you may be able to use the current interest rates to lower your total monthly payment. Again, if this is the case, you should still be sure to put any savings toward paying down your total loan balance so that you can be debt-free sooner.

However, it's important to mention that these loans come with upfront fees similar to the closing costs you’ll see when refinancing. In this case, it's important to make sure that the savings that you received from consolidating your debts outweigh the upfront cost.

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3. Get a balance transfer credit card

On the other hand, if you have mostly credit card debt, you may want to consider taking out a balance transfer credit card.

As the name suggests, balance transfer credit cards allow you to transfer existing balances onto the card so that they are all in one place. As an added bonus, these cards usually come with a 0% APR introductory period, which means that you will have time to pay down some of your debt without worrying about accruing additional interest.

In this case, it's important to be cognizant of how long the 0% introductory APR period will last. If at all possible, your goal should be to pay your debts off in full before it ends. Often, if you still have existing debt at the end of the introductory rate period, you can end up paying more in interest than you might have otherwise.

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The bottom line: debt management

No matter which option you choose, you shouldn't have to go through this process alone. If you're retired or thinking of retiring in the near future, and especially if you plan to do so with debt, your best bet is to talk to an experienced lender. He or she can give you advice on the best way to transition into your golden years based on your unique financial situation.

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