Retirement can be a joy or a misery. It largely depends on finance of course and those who take a responsible approach to their finances have a much better chance of joy than those who have spent all their income as they go along. Perhaps they take the view that tomorrow never comes? They must be relying on the Social Security System for their retirement but the benefits from that System will not be sufficient even if its funding is bolstered as required. The pressure on the System is increasing with people living longer and fewer currently contributing to it. The implications of that currently are that benefits are not sustainable at the present level beyond the mid-2030s. With Congress currently opposed to increasing taxation, who knows what will happen?
The additional issue, which is often forgotten or not even recognized, is that although spending habits might change in retirement it does not necessarily mean that spending naturally falls while income certainly will. A recent report by the Employee Benefit Research Institute (EBRI) has looked at those who have just recently retired and concludes that any drop in spending is marginal at best. Perhaps the most significant drop will be on transport which is logical given the fact there are no journeys to and from work but where are the other ‘savings’?
Those who have the ability to downsize significantly have a chance, even if they have little in the way of savings. When a couple have raised a family that has grown and started out on families of their own, they may well own a large home with little or no debt. It is not everyone’s choice to leave a familiar neighborhood but others may like a small home in a quiet part of the country, away from busy city life. That is easily achievable with the profit made from selling up invested safely towards future years. It is unwise to take risks but investing in the S&P 500 should guarantee growth. In some cases that will certainly mean their retirement prospects are good but they are in the minority. Others have to address their immediate problems even if they are unable to make any significant savings before retirement.
It is a fairly depressing scene that should get everyone thinking about what they have in place for themselves. What no one should have in debt that they are carrying forward with little obvious prospect of paying it back. The most dangerous, and the most common, form of everyday debt is on credit cards where the outstanding balance each month incurs a high level of interest. Many people simply pay off the minimum the credit card company requires but that hardly reduces what has effectively become core debt. It is something that should not be taken into retirement.
The best solution is a just right cash loans which can be justified while there is still a monthly pay check that can cover the monthly instalment involved. The problem is that interest on credit card balances is commonly above 20% and that is sheer waste, especially for those towards the end of their careers and contemplating comfortable retirement. Even those with a poor credit score but the ability to repay a personal loan will find the interest rate applied will be much lower.
Today’s online lenders have made loans readily available to those who can make out the case that they can afford to make the instalment payments for the full term of the loan. They tend to judge credit scores as less important than traditional lenders even if the interest charged is a point or two higher. The real point is that someone in trouble can start to repair their finances by getting rid of credit card balances which is important at any age. In mid to late middle age it is something that must be done as a matter of urgency.
When retirement finally comes anyone with significant debt will find their problems only increase. Even if they have funds from a 401K to add to their social security benefits life will not be easy and certainly rarely comfortable. If you see yourself in this situation start to act today.