Retirement should be the time of your life when you enjoy the fruits of the labour that you’ve worked so hard. Yet, retiring debt-free seems like an impossible dream for many of us.

If you want to retire without debt, it can be helpful to start planning and saving today so that you can enjoy a debt-free retirement. There are many ways for people of all income levels to achieve this goal. By following some simple tips, you can make it happen and focus on enjoying your retirement instead of worrying about bills.

How to retire without debt?

The key to a debt-free retirement is to pay down your debt before you retire and not take on any additional debt in retirement.  

Start with a budget or a retirement plan.

No matter how much money you have, it is essential to start with a budget or a retirement plan. You can take a look at your current budget and adjust it to help you decide how much you will need every month once you retire.  

Here are a few items to consider:

• Your monthly retirement income: consider all sources of income in retirement. These can include income from government sources such as Old Age Security (OAS), Canada Pension Plan (CPP), and other retirement income such as your employer pension plan or your personal savings and investments in your RRSP.
• Monthly expenses:  Take a look at your current monthly budget and adjust for items you will need to add or subtract in retirement. Will your monthly expenses stay the same or change when you retire? Maybe you don’t need to commute to the office daily, but you want to go on more vacations to visit family and friends. 

Once you have an idea of your expected income and expenses every month in retirement, you’ll have an idea of the additional income you will need.

Pay off any debts.

If you have any debts at the moment, consider paying them as quickly as possible. Your current loans might include your car payments, mortgage, and consumer debt such as credit card debt.

Depending on your debts and loans, strategies help you pay down your debt fast. A debt expert can help guide you through your options to pay down debt as quickly as possible. Once you have paid down your debt, the additional income can go towards your savings.  

Save, save, save.

If you have extra income, put it towards your retirement savings as soon as you can. Even a few extra dollars a week will add up. 

Most Canadians can use tax-sheltered accounts such as an RRSP, a TFSA or both to save for retirement. Depending on your financial situation, you can decide if you should save for retirement in your RRSP, TFSA or both!

If your employer offers a pension or any retirement benefits, take advantage of these options to maximize your income in retirement.

Consider your retirement lifestyle.

The key to a debt-free retirement is to start without debt and not take on any debt while you are retired. 

It is vital to consider where you want to live and the cost of the lifestyle you expect in retirement.  

• Will you need to live in a similar home, or will you be downsizing? 
• Do you want to live in the same city or relocate? 
• Are there expenses that will increase or decrease when you retire?

Some costs, such as travel, may go down, while others, such as health care, might go up. Make sure to factor in all potential changes to your lifestyle when planning for retirement.

Make some lifestyle changes now.

If you intend to retire as soon as possible, you might need to make some lifestyle changes right away. For example, downsizing your home or getting rid of a car payment can help free up extra cash each month for retirement savings.

Living below your means is essential if you want to retire debt-free. Spending less than you earn today will help you save more for retirement. Making a few small changes today can significantly impact your ability to retire debt-free tomorrow.

Use credit wisely.

If you use credit, make sure you do so without getting into more debt, now and in retirement. Credit card debt is an easy trap to fall into, especially when expenses exceed your income. 

Use your credit card only for what you need and make your payments on time to avoid fees and penalties. 

Make your money work for you.

One of the easiest ways to secure a debt-free retirement is to invest your money. Your investments can provide an additional source of income in retirement, such as through rental income or dividends. 

Whether you consider setting up passive investments, purchasing real estate, investing in the stock market, or mutual funds, there are many ways that your money can work for you. 

It is essential to take the time to learn about the ways that are appropriate for your age and risk tolerance. A financial advisor can guide you to the best ways to invest your savings to get to a debt-free retirement faster. 

Plan today to enjoy a debt-free retirement. 

Living a debt-free retirement is possible for many people, but it takes some planning and effort. By following some simple tips, you can make it a reality and focus on enjoying your retirement instead of worrying about bills. 

If you are focused on paying off your debts today to enjoy a debt-free retirement, our team of debt experts can provide support and expertise to help you get rid of your debt as quickly as possible. Contact us for a free consultation.