Millions of Americans spend their days dreaming of retirement.Yet millions of Americans Also may not be considered. important financial step They should be retirees.
Many people understand that paying off loans is important, but often focus on the wrong loan.
The three loans that Americans must pay off are: under consideration retirement.
Do not miss it
College and university loans are part of it. longest debt Americans will deal. Additionally, if you take out loans to help your children go to college, those loans may increase as you approach retirement.
Student loans are cheap now, but the freeze on payments and interest rates introduced because of the pandemic will only last until December. Interest rates on these loans could soar to 7.54% early in the year.
And those loans last longer. Her 2019 study for New York Life found that it took participants an average of 18.5 years to pay off their student loans.
Unlike mortgages, many student loans aren’t tax deductible, and StudentAid.gov data showed that 2.3 million borrowers were 62 or older. All of these payments are therefore deducted from your retirement income.
Therefore, Americans must find the next strategy. pay off student loans It’s similar to how they make mortgage payments. This includes scheduled payments made on a regular basis to pay off that debt sooner and get you closer to your retirement goals.
personal loans and credit cards
Personal loans and credit cards generally have the highest interest rates. This is especially true for credit cards, which currently have an average interest rate of 21.59% in the US, according to LendingTree.
Personal expenses such as moving expenses, wedding expenses, and even medical bills, funeral expenses, and unexpected expenses can also appear on your credit card.The balance on these credit cards is paid immediatelyDon’t delay retirement savings.
Instead, consider reducing your mortgage payments and using those funds to pay off other high-interest loans.
Mortgages have low interest rates, so you can keep your savings and pay off your debt.From there, start putting cash aside emergency fund for about three months’ wages. That way, if an unexpected expense comes up, you’ll be prepared.
Finally, car loans are another area to pay off before retirement. According to MyAutoloan, as of August 2022, the average auto loan interest rate for high credit buyers was 7.88%.
But if you have bad credit, it jumps to 19.87%. This is about the same as credit card interest rates.
In addition, these retirement benefits should also be considered. Spend $400 on your car, $300 on credit cards, and more on student loans, and suddenly you’ll have far less cash on hand for retirement.
Deferring retirement to pay off these loans and setting aside wages to pay them off could save you thousands in interest and create a cushion for you to retire.
how about my mortgage?
Then why don’t you pay off your mortgage too? It’s not just about low interest rates. National Average Mortgage Interest Rate For a 30-year fixed interest rate of around 6.5%, this is an advantage.
Mortgages also have tax incentives. Homeowners can claim federal and state tax credits on mortgages and home equity loans that most personal loans and credit cards don’t.
So while you may be tempted to pay off your mortgage, pay off a high-interest loan, or put extra cash into your retirement plan to increase it, neither strategy will make you retired and you. It is more likely that you will be able to get closer to your dream. very reach financial freedom.
what to read next
House Democrats formally drafted a bill banning politicians, judges, their spouses, and children from trading stocks, but this is still what they do. allowed to own and do
Billionaire Carl Icahn warns ‘the worst is yet to come,’ but when audiences ask him stock pickhe provided these two “cheap and workable” names
Biggest crash in world history”: Robert Kiyosaki issues yet another dire warning to avoid “whatever can be printed” — Here are 3 hard assets he likes instead
This article is for informational purposes only and should not be construed as advice. It is provided without warranty of any kind.