3 Ways To Become Debt-Free in Less Than Five Years in Your 60s
Written by
Yaël Bizouati-Kennedy
Edited by
Elizabeth Constantineau
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Becoming debt-free when you retire is a goal many strive to achieve. Yet, with inflation, soaring rates and the resumption of student loans, catching up on debt has been tricky for many Americans lately.
When retiring, switching to a more fixed income often means living on a more restricted budget, so becoming as debt-free as possible as you approach your golden years is one of the steps that can not only help you live with less worry but also help you maintain the quality of life you’re used to.
To put this in perspective, baby boomers carried an average of non-mortgage debt of $19,203 in 2023, a 2.3% increase from 2022. And they carried $190,441 in mortgage debt, a 1.5% increase from 2022, according to Experian.
In turn, as MassMutual explained in a blog post, having consumer debt in retirement will either reduce the monthly cash flow available to spend on priorities such as healthcare or will necessitate drawing down retirement accounts faster than planned.
“Getting out of debt in your 60s can be a bit more challenging if you are retired and on a fixed income, but the basics are the same,” said Jay Zigmont, PhD, CFP, founder of Childfree Wealth.
“Lock your credit cards and stop taking out any more debt. It is very hard to get out of debt if you are still taking out more,” he said.
Reduce and Eliminate High-Interest Debt
Going into retirement with high-interest debt puts your financial security and longevity at risk.
“This is why I counsel all my clients to make eliminating debt, especially high-interest debt, their top priority as retirement nears,” said Steve Sexton, CEO of Sexton Advisory Group.
Sexton added that there are several strategies as part of a debt reduction plan, including reducing nonessential spending or even implementing a spending fast for a specific period of time to free up funds to pay down this debt. You can use the snowball or avalanche methods to systematically pay down debt, negotiate with creditors to reduce interest rates and/or to come up with a more realistic payment plan, or even consider debt consolidation, a form of refinancing that entails taking out one loan to cover all existing debts.
Have a Budget in Place
Make sure you have an accurate budget in place so you know exactly what’s coming in and going out every month. Then, make required payments on secured debts, which are debts on tangible assets — such as your home or car, said Sean Fox, president of debt resolution at Achieve.
“Next, pay any student loan debt — yes, plenty of people in their 60s have student loan debt, whether it’s their own or for the education of their children or grandchildren,” he said.
If you can’t pay debt on your own, you could consider a balance-transfer card, if moving existing debt to a zero-interest or very low-interest card, he said.
Another option is a debt consolidation loan.
“This type of loan usually has a rate lower than found with credit cards — though it all depends on your credit,” he added, noting that it will also have a strict payment schedule that keeps people on schedule for paying off the debt.
Reduce Expenses
As Taylor Kovar, CFP, CEO and founder of Kovar Wealth Management, explained, reducing expenses can free up more money for debt repayment.
“This might involve downsizing living arrangements, cutting discretionary spending, or even taking on part-time work or a side hustle for additional income,” Kovar said. “Review and adjust your budget to minimize unnecessary expenses. Consider lifestyle changes that can have a significant impact, such as downsizing your home, selling a vehicle, or cutting back on travel and luxury expenses.”
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