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Don’t even think about retiring until you have these 3 things fully paid off — and no, your mortgage isn’t one of them


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Don’t even think about retiring until you have these 3 things fully paid off — and your mortgage isn’t one of them

Millions of Americans spend their working days dreaming about retirement. Yet millions of Americans also fail to take the crucial financial steps they should take before becoming a retiree.

While many understand it’s important to pay down loans, they’re often focusing on the wrong ones — prioritizing their mortgages, which have lower interest rates, rather than expensive high-interest accounts.

Here are the three loans Americans must pay off before even considering retirement.

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School loans

College and university loans are some of the longest lasting debts Americans deal with. What’s more, those loans may increase as you near retirement if you’ve borrowed money to help children through college, too.

While federal student loans are inexpensive right now, the payment and interest freeze introduced by the Biden administration only lasts until the end of August.

And those loans last a long time. A 2019 study from New York Life found it took participants an average of 18.5 years to repay student loans.

Unlike a mortgage, many student loans aren’t tax deductible, and data from shows that 2.5 million borrowers were aged 62 and older. So all those payments take away from your retirement income.

Americans should therefore find a strategy to pay off their student loans that’s similar to how they make mortgage payments. This would involve scheduled payments taken out on a regular basis, paying off that debt faster and bringing you closer to your retirement goals.

Personal loans and credit cards

Personal loans and credit cards generally have the highest interest rates. This is especially true with credit cards, which currently have an average interest rate of 23.39% in the United States, according to LendingTree.

It’s not unusual for personal expenses to end up languishing on a credit card — both expected costs from moving or paying for a wedding as well as unexpected medical bills or funeral costs.

While credit card balances should be paid down quickly and well before you retire, you also shouldn’t let them delay saving for your retirement.

Instead of putting off saving, consider lowering your mortgage payments to use those funds to pay down other high interest loans.

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Mortgages have lower interest, which will allow you to hold onto your savings and pay down debt. From there, start putting cash aside in an emergency fund with about three months of wages. That way, if unexpected expenses come your way, you’ll be ready.

Auto loans

As of December 2022, the average new car loan for a buyer with great credit was 8.6%, according to MyAutoloan.

But if you have bad credit, that average soars up to 22.16%. That’s about as much as the interest rate on a credit card.

Your interest rate probably lies somewhere in between, but it’s still going to add up. If $400 goes into a car payment, and $300 to a credit card and more for student loans, suddenly you have far less cash on hand for your retirement.

However, if you hold off on retirement to pay off these loans, putting aside wages to pay them down aggressively, you could be saving yourself thousands in interest while creating a cushion to retire on.

What about my mortgage?

So why not pay down your mortgage too? It’s not just the cheaper borrowing costs, although with the average national mortgage rate for a 30-year fixed rate at 6.15%, that is an advantage.

It’s because there are tax benefits available to you for your mortgage as well. Homeowners can claim a federal and state tax deduction on mortgage and home equity loans that you don’t get with most personal loans and credit cards.

So while you may feel secure fully owning your home, paying off higher interest loans while putting extra cash into your retirement fund is the strategy more likely to bring you closer to retirement and your dream of true financial freedom.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.


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