Everyone wants to live comfortably in retirement, unfortunately that dream is becoming less attainable, with an increasing number of Australians entering retirement who do not own their homes outright.
A recent study from The Australian Centre for Financial Studies indicated that eight per cent are still paying off a mortgage, while around 15 per cent of retirees are renting property.
Here are some tips that can help you fight back against debt now and pay off your mortgage sooner, ensuring you enter retirement in the best possible financial position.
Avoid credit where possible
As a general rule, if you can’t afford to pay off your credit card each month – then you shouldn’t be using it. Tightening up spending and limiting the interest you pay now will pay significant dividends when it comes time to retire.
Make it your goal to pay off the debt that carries the highest interest first – i.e. credit cards.
There has never been a better time to take advantage of all time low interest rates by refinancing your existing mortgage.
Use an offset account
Mortgage offset accounts are a great way to reduce your interest each month, as the interest accrued in the offset account, offsets the interest accrued in your mortgage account. This option is only for those who are financially disciplined.
With interest rates so low, there has never been a better opportunity to increase your loan repayments and decrease your debt.
Do the sums
Sit down and do the numbers to work out how much you need to be paying now, to ensure you are debt free by your intended retirement age.
Downsizing to a house that will reduce your mortgage to nil may be an effective way of entering your retirement free of debt, but consider carefully if it is the right decision for your situation.
Contemplate your options
Although not ideal, consider working a little longer than you had planned. This will help pay off debt and boost your savings and your super balance, allowing you to live a more comfortable lifestyle in retirement.
If you’re interested in reducing your debt, refinancing an existing mortgage or planning your financial future – reach out to one of our experienced ChapterTwo consultants today.