You may worry about whether it’s better to pay off debt or save for retirement. Almost everyone has some kind of debt. Maybe it is necessary (like a mortgage or a car loan). Some may come from everyday or discretionary spending, like department store cards or other credit card debt. It’s natural to be concerned about whether to save or pay down debt.
In fact, according to Magnify Money, 46% of Americans expect to retire with debt. This includes younger generations who may carry debt into retirement. Since repaying debt on a fixed income can pose extra challenges, it’s never too early to think about how today’s spending can affect tomorrow’s dreams and financial well-being.
Table of contents
Will you ever retire?
While some people may plan on retiring at 65, others at 55, and maybe some even dream of bowing out at 40, an Employee Benefit Research Institute study suggests dwindling confidence in the possibility of early retirement. More than 29% of workers report they plan to retire at 70 years or older.
Lack of confidence in financial security is one reason people plan to retire later. In fact, seven in ten workers plan to work for pay in retirement.
You don’t have to let these statistics get you down. The same report notes fewer retirees actually do work for pay than had expected to. So, be inspired to set your retirement age goal and start planning.
What can you do now to save for retirement?
You can take concrete action by paying down higher-interest debt sooner and adding to retirement savings.
Debt consolidation is one strategy for lightening your load and paying off debt. Debt consolidation means that your various debts, such as credit card bills or loan payments, are rolled into one set regular monthly payment.
According to a 2022 report by NerdWallet, the average U.S. household with credit card debt carries an estimated $7,486 in revolving credit card balances.
When planning your retirement, it’s a smart idea to take control of this debt. You’ll want to pay down your higher-interest debt soonest so you can save money on interest.
How much can debt consolidation help?
If you are specifically looking to reduce interest rates from credit card debt, here are three reasons why using a personal loan to consolidate debts is a smart idea:
- Rates on a personal loan can be lower than the interest on variable debt, so you can pay less on interest. That’s savings you can put toward your retirement fund.
- You can lock in a fixed rate so that your monthly payment won’t change, while other interest rates may be on the rise. Even small interest rate increases can cost you more money on variable rate debt.
- Instead of managing multiple bills, you can plan your budget around having one set regular monthly payment and an end date for the loan.
Discover’s debt consolidation calculator can estimate savings on interest, as well as payoff time, to show you the value of a debt consolidation strategy.
Planning for the future
When it comes to retirement, there are many sources you can consult. The important thing is to keep an eye on your long-term goals.
Not everyone can have a perfect financial picture at any given moment — with a budget that allocates exactly what you need for bills, retirement, debt reduction, and emergencies — but it’s never too late to take steps in the right direction.
Whether that’s simply saving money on a daily basis, planning for the long haul, or lowering interest payments on debt, you’re stacking the building blocks in your favor towards the next phase of your financial life.
Ready to check your rate and manage your debt? Check Your Rate