May 14, 2019 by Rebecca Crommelin
In a perfect world, we would retire completely debt free with enough money and assets to enjoy retirement.
Unfortunately, this isn’t always a possibility. With the high property costs, more Australians have had to take on a large amount of debt and so may retire without having paid off their mortgage.
If you’re approaching retirement and you’re worried about paying off your debts, there are a few steps you can take to help reduce your debt in time for your retirement.
1. Review your personal debts
These debts could include your home loan, credit card debt or car loan. Make sure to add in any interest and fees you’re paying on your debts so you know just where your financial situation sits.
2. Prioritise to pay off your high-interest rate debts first
For example, if you have some credit card debt, it’s smart to pay this debt down as quickly as possible as it’s charging you the most in interest repayments.
3. Book in a Free Home Loan Health Check
Stay on top of your home loan and make sure you’re in the most competitive and best product for your needs by regularly reviewing it with our Free Home Loan Health Check. If you haven’t reviewed your home loan in 2 years, it’s very likely that there is a more competitive interest rate and/or home loan features on offer for you that you should be taking advantage of.
Book in your Free Home Loan Health Check today
4. Make extra repayments when possible
Always try to make extra loan repayments when you can. If you come into any extra funds such as a bonus or tax return, put it straight towards your home loan because the faster you can pay off your mortgage, the less interest you will pay over the loan term. You should also consider maximizing your home loan features such as using an offset account, which lowers the amount of interest you pay on your loan. However, not all loan products have an offset account so it’s best to speak to our team at Mortgage Choice in Perth CBD to make sure this is the right option for you.
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5. Consolidate your superannuation
If your super is sitting across multiple accounts then you’re likely to be paying multiple fees which can eat into your nest egg for retirement. Before you consolidate your super accounts, be sure to do your research and check for any termination or exit fees. In addition, make sure your new fund suits your appetite for risk and provides insurance options that suit you (such as income protection, death and disability insurance etc.). Just like any investment, your superannuation fund should be chosen carefully and this becomes even more significant as you approach retirement.
6. Make contributions to your super
It’s a good idea to make voluntary contributions to your super to give it a boost. If you think of your super like a forced savings account, it’s wise to make additional contributions when you can as you won’t be able to access it for unnecessary spending.
7. Invest
You might want to think about investing your savings to help grow your wealth for retirement. Your investment strategy should vary depending on your appetite for risk and how close you are to retirement. Typically, the closer you are to retirement, the less risk you should be taking with your investments.
8. Consider downsizing
It’s likely as you approach retirement you will need less living space as your children move out of home. Downsizing to a smaller and less expensive home could free up a considerable amount of money, which you could put towards paying off your home loan or contributing to your super.
9. Seek expert advice
Last but not least, it’s definitely an important step to speak to an expert. Even though there’s a lot of information online, it’s worth noting that most financial service providers will likely offer ‘general advice’ online, which won’t cater to your financial goals and situation.
At Mortgage Choice in Perth CBD, we can help you take the right steps to pay off your home loan faster AND our financial adviser can offer expert tips to help you grow your wealth, set strategies to minimize your debt and prepare for your retirement.