5 Ways To Get Out Of Debt Without Sacrificing Your Retirement Savings
Saving for retirement and getting out of debt aren't mutually exclusive, yet far too often people give up one to do the other. While it's important to lower your debt load as you enter retirement, you don't want to sacrifice retirement savings to do that. Sure, going into retirement without any debt is an enviable position to be in, but if it means you don't have any money saved to live off of its quickly going to become an unattainable situation. From budgeting for both to consolidating your debt into a lower interest rate, here's a look at four ways you can get out of debt and at the same time save for retirement.Time Your Strategy To Your Retirement Date
How aggressive you are in terms of saving for retirement is going to depend on your age. If you will be trading in the briefcase for golf clubs in a few years, then saving is going to be the main priority. However, if you have twenty years or more before retirement, then your focus should be reducing your debt. That doesn't mean that you don't save while you are paying off your loans, but you may have to cut back how much you're saving to get out of debt.Consolidate Your Debt Into A Lower Interest Rate
Some debt is better than other types of debt; however ultimately all consumers aim to become eventually debt free. When eliminating debt, it's important to tackle the high-interest rate loans first. After all, the higher the interest rate, the more it's going to cost you to pay it off. If you have multiple lenders, you owe money to, consolidating it into one loan may make it easier to pay off each month. That only makes sense if you are getting a better interest rate on the debt. You don't want to consolidate to make it easier and end up paying more. Be wary of those loans that will consolidate all of your debt and have you pay the same amount each month for a certain amount of years. Typically they have a high interest rate attached to them as well as fees.Take Advantage Of Company Match Programs
Retirement can easily last more than twenty years, which means you are going to have to amass a pretty sizeable nest egg. That can seem impossible to do if you are drowning in debt; however, one way to boost your retirement savings for free is to take advantage of your company's 401 (K) match program. Many employers will make employee contributions up to a certain percentage. That is free money, which is why you should max out the match regardless of how much debt you have. Let's say your company will match up to 6%. You'll want to make sure you are contributing 6% into your 401 (K) so you can get the full amount.Downsize Your Lifestyle
Paying down debt and saving for retirement is possible, but it may require some sacrifices on your part to achieve those goals. There are several ways to cut costs that will free up more money to save or reduce your debt. That could mean skipping the trips to the coffee house or eating in instead of going out to dinner three times a week. Giving up the landline, reducing your mobile phone bill and shopping during sales are other painless ways to free up some cash flow. If the debt is high, and you are close to retirement, selling an expensive home and moving into a cheaper one can go a long way in improving your debt and retirement savings situation. The idea is to free up money so that it can be used towards those two important goals. After all, that leather bomber jacket for $300 may make you feel good temporarily but that purchase may give you grief when your credit card bill arrives.Budget For Both Goals
Budgeting is the cornerstone of any sound financial plan, and it can easily be applied to saving and paying off your debt at the same time. Once you have your debt in order, and you figure out just how much you need to live comfortably in retirement you can come up with a budget and earmark money for each goal. Again, your time horizon and the interest rates on your loans will dictate which gets paid first and how much is put in savings. But setting a budget and sticking to it can go a long way in getting out of debt without sacrificing one of the most costly things you face: retirement.The Bottom Line
Debt and saving for retirement can go hand in hand, granted you devise a plan to tackle both at the same time. Far too often people wrongly assume they have to do one or the other, and that can end up hurting them in the long run. From taking full advantage of company-sponsored retirement savings programs to consolidating your debt into a lower interest rate payment, there is a host of ways to cut your debt load without sacrificing your retirement.