The following tips can help you enjoy a debt-free retirement with enough funds to live on well after employment.
A debt-free retirement ensures that you have enough funds to live on after employment. Whilst this is something most people are working towards, analysis from the Australian Centre for Financial Studies reveals that some retirees allocate up to 40 per cent of their retirement pay to their mortgage. Some 15 per cent of retirees are still renting property, while around eight per cent are still paying their home loans.
Follow these tips to ensure you are on your way to enjoying a debt-free retirement:
- Do the math.
Calculate your mortgage payment and add a little extra – as much as you can afford. Even if it’s only $20 extra per week, if you can stand by this, your home loan will be paid off well before retirement. Also, pay off your debts with the highest interest rate as a priority.
- Bargain for the best deal.
Make a point to renegotiate your interest rates regularly; you never know what discount you can get just by asking. Now is also a good time to pay extra to offset the capital of your home loan with today’s lower interest rates.
- Pay the principal, too.
Your home loan can be must more quickly paid off when you also pay the principal along with the interest repayments on your mortgage. Be strategic about it, however – for instance, do not use cash advances from credit cards, which carry higher rates, just to pay off your home loans.
- Consider a smaller home.
Downsizing your house can considerably lower your home loan and help you achieve a debt-free retirement. It will also take longer to pay off debt when you refinance, so try to avoid taking on additional debt.
- Work a little longer.
While the idea of retirement is very appealing, extending your working years beyond the retirement age also means you’ll have additional income to pay off the mortgage, and also add to your savings.