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Case Studies: Real-Life, Pre-Retirement Debt Payoff Success

Case Studies: Real-Life, Pre-Retirement Debt Payoff Success

Managing debt as we near retirement is a great way to free up cash flow and offer peace of mind. It’s a relief to know your investments and assets have increased financial security as you wind down on working hours. Of course, carrying too much debt is never a good idea. However, there are plenty of reasons to get rid of debt before retiring, including to:

  • Avoid risky variable interest rate rises
  • Simplify estate planning
  • Avoid unnecessary interest payments
  • Increase cash flow
  • Change in debt-tax advantages (mortgages, etc.)
  • Flexible spending

Working with a financial advisor, you can determine the best way to pay off debt and which debts should go first.

In this blog, we’ll look more closely at the advantages of paying down debt with some real-life stories of success.

Mr. Murphy’s Estate Planning Simplification

Mr. Murphy, the director of human resources for a thriving manufacturing company, retired with substantial savings. Historically, money was never a problem for him since he lived within his means and always contributed close to the maximum on his 401k. Still, a few personal loans and mortgages were taken out over the years. As Mr. Murphy began estate planning, he realized his existing debts complicated the inheritance process for his family.

After settling debts, assets were clear and unencumbered. This streamlined the estate planning process, creating a smoother transition with minimal conflict.

A College Fund for Mrs. Morgan’s Grandkids

When Mrs. Morgan retired from her job in the administration department for the state of Wisconsin, she had healthy retirement savings, a generous pension, but also some debt. Most debt was from a couple of duplex rentals she’d invested in over the years.

During a conversation with her son, Paul, Mrs. Morgan realized her son was struggling to save. Knowing Paul had twin girls to care for, she decided to clear her debt. The free money created from her debt repayment made it easy for Mrs. Morgan to create a college fund for the girls.

Mr. Kapoor’s Financial Cushion

Mr. Kapoor accumulated a high net worth during his years of owning and practicing within his dental office. While finances haven’t been an issue since dental school, Mr. Kapoor can’t help but recall the financial crisis in 2008. During the crisis, many incurred liquidity issues due to debt.

To avoid future liquidity issues, Mr. Kapoor decided to clear his debt. If the market takes a turn, Mr. Kapoor can rest easy in retirement, knowing his assets are secure.

A Change of Priorities for Ms. Gauthier

Life has been non-stop for Ms. Gauthier, a working widow of two children. When she retired, Ms. Gauthier decided she was done with the hustle and bustle of corporate life. She began valuing experiences over possessions.

With a mix of debt and assets, Mrs. Gauthier chose to sell some of the more extravagant assets to pay off the debt. With money freed up, she was able to travel overseas, indulge in her lifelong photography passion, and donate to some truly worthwhile charities.

Contact Uncommon Cents Investing

Have some questions about pre-retirement debt management or financial advising in general? We can help. At Uncommon Cents Investing, we’re proud to support our clients in deciding when and in what order to eliminate debts before retirement. And because we understand the unique challenges and opportunities facing those in retirement or nearing it, we’ll be honest with you if you’re doing something that will derail you from achieving your goals! Contact us today for an introductory call!

Sheena Hanson, CFP® - Investment Advisor Representative and CCO

More About the Author: Sheena Hanson