You want as few expenses as possible on a fixed income. Here's how to cut one of the worst.

If you are a typical American approaching retirement, chances are you’re carrying some form of debt. In fact, the median debt per American household is $2,300, while the average debt stands at $5,700, according to a study by Lending Tree. But retiring with debt can be detrimental to retirement planning.

“High levels of debt can leave aging consumers unable to put money aside for other financial goals,” Nitzsche says. “Unfortunately, it is common for seniors to be retiring with debt.”

Most financial advisers suggest people pay down their debt to a manageable amount and have enough in savings for emergencies, maintenance costs, and leisure expenses. However, a debt-free retirement is ideal. When you retire, you are living off a fixed income — meaning you are not making any more money. So spending your limited resources on debt (and interest on the debt) is like throwing your retirement money out the window.

Following are several strategies they suggest for a debt-free retirement.

1. MAKE LIFESTYLE CHANGES TO AVOID RETIRING WITH DEBT

According to St. John, frequent restaurant trips or extended cable packages might make life a little more comfortable, but these are living expenses that can be cut back to help manage debt.

Instead of paying $20 here and there on unnecessary services or products, advisers suggest people put that money toward paying down their debt. “Even if it’s $25 a paycheck, it’s something they weren’t doing before,” St. John says.

2. BUDGET PROPERLY FOR A DEBT-FREE RETIREMENT

Setting a strict budget and adhering to it can help. People should budget for current and future expenses, while also factoring in debt and expected retirement income. They should plan to have no more than $5,000 in debt or should make sure they can pay off their debt within the first three years of retirement.

“Most people spend more money in their first three years, and when you have debt on top of that, the reality is that most people won’t pay it off,” Van Metre says. “They should have a budget and stick with it so they can build into their budget their debt payments.” Using a retirement calculator can help people determine what they will need to have saved or paid off before leaving the workforce.

3. SEEK FINANCIAL ADVICE EARLY

Consulting a financial adviser, retirement planner, or debt counselor in the years prior to retirement can increase the likelihood of successfully managing debt. Ideally, people should seek advice 10 years before retiring. However, doing so five years prior would be realistic and would still allow time for financial planning.

The more time left before retiring, the better chance of achieving a debt-free retirement. “Time gives people the opportunity to put things into perspective and gives us the opportunity to guide them and make their retirement a reality,” Van Metre says.

4. AVOID EASY DEBT

Truly the best way to stay out of debt is to avoid it like the plague in the first place. Debt can be so tempting. If you feel like you really want or need something, consider tips for avoiding easy debt.

If you need help with your debt, you can speak to one of our Certified Debt Consultants at the number below:

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