Even though debt can feel overwhelming, and it may seem as though a service such as a licensed insolvency trustee is your only solution, there are ways you can save for retirement while paying off debt.
There is no shame in getting credit counselling or debt help. But before you take that step, read a few tips that may help you get started saving for retirement.
Yes, You Can Save For Retirement—Even While in Debt
Even though debt can feel overwhelming and it may seem as though a service such as a licensed insolvency trustee is your only solution, there are ways you can save for retirement while paying off debt. There is no shame in getting credit counselling or debt help, but before you take that step, read a few tips that may help you get started saving for retirement.
Set Up an Emergency Fund
Before planning retirement savings, it is a good idea to first have emergency savings. This way, when you have an emergency, you will no longer be doing what so many do during a crisis - withdrawing retirement savings to fund unexpected expenses. It is nearly impossible to have retirement savings without first having emergency savings.
Once you have established an emergency savings fund, with good budgeting techniques, you will no longer be eating into your retirement savings and can now watch that money build up toward the day when you are no longer working. It seems like an odd way of handling your debt to put money into savings and pay the minimum amount on your loans and credit cards. However, this sort of cash is intended for those times when things go wrong. Having it will help you avoid maxing out your credit cards or taking on a new loan or line of credit to pay for emergency items. As a strategy, most money experts recommend it.
Pay Debts and Save in Increments
Make short and long-term financial goals for yourself. For instance, if your emergency fund was $500, once you hit that milestone, you would want to begin paying more of your debts. Experts suggest picking the highest interest or lowest debt amount first. Once that is paid off, the money you were using for that debt can now become retirement savings. Other smart considerations for getting more retirement money may include:
Take advantage of company retirement savings match programs (where they match what you save up to a certain percentage)
Think about length of time until you retire; the longer you have until retirement the more options you may have for various types of savings and interest accounts
Your credit score - if you otherwise have a good credit score, then paying off debt soon may not be as much of a priority as saving toward retirement
Sometimes debt and savings matters can be confusing or overwhelming. We understand. Feel free to call us with any questions about saving for retirement or issues related to bankruptcy or credit counselling. We have offices for debt and bankruptcy solutions in Ottawa, Kingston, Brockville, Cornwall, Pembroke, Kanata and Smith Falls. With locations across Eastern Ontario, you can call our team directly at 613-699-2538 or contact us online for a free, no-obligation consultation and let us help you on the road to a new beginning™.