Managing Debt as You Inch Towards Retirement
You did right by your kids, now it’s time to do right by you. For many parents, being there for their children often includes a premium education, including a bachelor’s degree. However, the desire to provide for them in this way can take a serious toll on the household finances, and for some is not even attainable with savings alone.
Utilizing Parent PLUS Loans and taking on debt to give your child a great opportunity is a wonderful gift, but at some point, it could put your own retirement in jeopardy. Shifting your financial priorities as you get closer to retirement age is essential, and if balance transfer to your child is not an option, consider refinancing your parent plus loans with a private lender in order to save money off your monthly expenses.
Research Your Options
Before you took out a Parent PLUS Loan, you likely had a budget, and a plan for your financial future. Once you have decided that refinancing is your best option to free up income to allocate elsewhere, it’s time to scout out options.
Private lenders are plentiful and since you have a clear goal in mind, doing the leg work to find the best one for you can get you back on track and reduce risk of having to shuffle things around, again. If you have good credit, and a stable income, you could qualify for refinancing a loan with a much lower interest rate than you have with your current lender.
Saving money on interest is attractive because not only will the lower payment free up funds monthly for you, but it decreases your total amount repaid, shrinks the mountain, so to speak. If you took out multiple loans for your student, then refinancing and consolidating also creates the ease of one payment monthly, which creates manageability and simplicity which is often important for handling finances during retirement.
Emancipate Adult Children
Sit down with your grown children and explain to them what you are planning. This conversation can be difficult and undesirable; however, it is necessary for several reasons. Discussing your retirement plans with your children can benefit them by giving them tools to plan their own lives.
Additionally, you might get a sense of what to expect once you yourself are older and if living with them or receiving any financial assistance from them is even an option. If you are currently helping your adult children financially, this is also a good opportunity to discuss your need to cease that support.
Supporting adult children can undermine their self-sufficiency and create bad financial habits for them, habits that you tried to steer them away from by supporting them in the first place, it can be a hamster wheel. Initiating and having this discussion not during crisis or chaos is also a great opportunity to keep the conversation civil and goal oriented.
Waiting until a problem arises to let your adult children know what you are facing can create emotional barriers that hold everyone back from their own end games. A calm approach is best and gives all parties involved a chance to ask questions and contribute responses in a productive way.
Keep Earning for as Long as You Can
Delay quitting your job as long as possible, slowing down the timeline of when your income stops, increases the time line for your nest egg and investments to grow, and gives you longer to contribute to them, so they can be more beneficial to you when it comes time to bust into them.
Sure, you can retire at a specific age, sure you can claim social security beginning at a specific age, but if you can drag your heels on both, do so. Extending the life of your retirement savings will give you more financial freedoms when the time comes, you are not working your butt off now to earn and save money, to have to pinch every single penny when you are retired.
If you can delay the gratification of retirement, you create options for yourself once you do. Work can help you to stay active and engaged in society, maintain personal connections, and provide structure to your days. Use your last few years of working to daydream about what you plan to do day to day during your retirement as well as the network of people you plan to surround yourself with.
This way you leave the work force with some type of plan for your personal time, instead of just quitting at the opportunity you have, and running the risk of finding yourself bored and frivolously spending money to fill your days.