With mortgage rates near record lows, high levels of household debt, and the first wave of Baby Boomers now retiring, debt consolidation – sooner rather than later – could be a key tool in positioning yourself for a financially healthy retirement.
Johnathon Chevreau of the Financial Post writes that “Debt, Seniors Don’t Mix“. He notes that carrying debt – particularly high interest credit card balances – into retirement can leave retirees vulnerable to “rises in interest rates, layoffs, market crashes or unforeseen emergencies.” While those still working have some degree of flexibility to cope with such changes, once retired and dependent on a fixed income, Mr. Chevreau points out that “a retiree dependent on a fixed income (is), as the term suggests, in a fix.”
Moshe Milevsky, author and Finance professor, is cited for his distinction between “dumb” debt and “smart” debt. “Dumb” debt, in his analysis, “means carrying revolving loan balances on high-interest credit cards or department store cards, or still paying off conventional mortgages.”
The consensus of financial planners, actuaries and retirement strategists cited by Mr. Chevreau agree that carrying debt into retirement “should be a last resort”. But, in some cases (and given the peculiarities of modern families with divorces and second marriages etc.) analysts note that carrying some debt into retirement may be unavoidable. In those instances, it is essential to make sure any debt carried over into retirement is “smart” debt.
Far better still, for homeowners – particularly Young Boomers – whose retirement horizon is farther down the road, is to face the issue of debt consolidation head-on. For them, it may be the best time to consult a trusted mortgage broker who can put together a debt consolidation package that provides “smart” debt relief now, – when interest rates are near-record lows – instead of waiting till retirement is imminent and interest rates are higher.
