by Ken Vincent, Featured Contributor
CONVENTIONAL WISDOM has long said that it is best to work off other peoples money. Developers have done it. Businesses have done it. Even lenders have done it. It has become such an accepted mantra that individuals have done it, sometimes to excess.
Borrowing to buy cars, houses, furniture and of course the wide spread use of credit cards is the norm today.
However, as one nears retirement it is time to reassess that theory and how it can impact retirement.
It is one thing to carry a manageable amount of debt when working. But, it is quite another to have debt when on a fixed income. Retirement can only be considered secure if there is little or no debt. On a fixed income, whatever the source (s) things can take a down turn with little warning and few options to change the direction. Debt can be the difference between making it and not.
If you don’t owe money, no one can take your house, your car, or throw you into bankruptcy. Yes, in a worst case scenario you may have to reduce your standard of living, but you won’t lose everything you have toiled to secure. The side benefit is the ability to get a good night’s sleep knowing that you owe nothing to anyone.
Personally, I don’t like debt. I’ve had it, sometimes a lot of it. I’ve also spent a lot of nights drinking milk and eating cookies when I should have been sleeping.
My advice as you approach retirement is to get rid of debt. Saving a nest egg is essential of course, but that isn’t secure if it is offset by debt.
Pay off credit cards, cars, and if necessary downsize the house. But when you walk off the job for the last time be debt free. What do you think?