How to avoid carrying debt into retirement

 In latest news, retirement

Increased housing costs and low wage growth are seeing more Australians carry higher levels of debt into retirement.

Repaying this debt can place a major drag on retirement cash flows and hinder the achievement of retirement goals. These may include maintaining an adequate quality of life through retirement, and leaving a benefit to the next generation that is unencumbered by outstanding debt.

Fortunately, there are a number of ways by which retirement debt can be avoided or managed.

  1. If you’re still working, increase your debt repayments. It may also be worth considering delaying retirement. However, bear in mind that with increasing age comes the increasing likelihood of being forced into retirement by ill health.
  2. Tackle high interest debt first. If you’re paying interest on credit card balances or personal loans and have the ability to redraw on a mortgage, pay off the higher interest debts from your mortgage account.
  3. Already retired? Look at using your superannuation to pay off outstanding debt.
  4. Down size your home. This may allow you to pay off debts and still have enough to purchase a smaller home. If this strategy frees up more money than you need to repay your debt, investigate the superannuation incentives available to ‘down-sizers’. Also be aware any surplus cash you pocket may reduce age pension payments.

As always, it’s important to take your personal situation into account. For example, if your mortgage interest rate is low, you have significant investments earning a good return, and you have a long life expectancy, carrying some debt into retirement may be worth considering.

For help in managing your debt in retirement talk to iPlan. Call us on 07 3062 7444 or email admin@iplan.net.au. 



This article provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, iPlan Financial Services does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, iPlan Financial Services does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

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