For most Americans, a happy and comfortable post-retirement life is simply a dream. A study by the Economic Policy Institute had revealed that an average American aged between 56 and 61 years have only $163,577 in 401(k) accounts. A majority of experts recommend a minimum one million dollars as savings during their retirement years.
Credit card threat
Credit card debt is one of the biggest inhibitors of a happy retirement life. Having a credit card means suffering an accrual of interest. A huge amount of money is paid to pay-off the interest. If you have credit card debt, the easiest way to solve the problem is to reduce the interest rate. You will be surprised to find how many companies agree to this demand if the debt is kept under control. After you get this, map out a good payment plan which permits the payment of a large portion of both principal and interest every month. Use a financial calculator to make this happen.
Avoid any new credit charges until all the balance gets paid. Use the credit henceforth as a tool and not as an endless bank account. Pay all balances at month end. You will accumulate rewards if you do this. It will help you to avoid all interest and all the late fees.
College tuition and faster debt pay
Your kid's college tuition is yet another impediment to a happy post-retirement life. Remember that retirement is inevitable. A college education can be funded in a number of ways, like grants, work-study programs, and scholarships. There will be also federal student loans. However, no scheme like the retirement loan exists. Once you leave work-life, you will require compulsory savings to sustain your life. Do understand that a comfortable retirement life could turn out to be an expensive one. You must account for inflation. Nothing much can be expected from Social Security benefits.
Contrary to popular perception, paying off quickly all the fixed debts can be a double-edged sword. Many believe that paying off all fixed balances as fast as possible could result in a more calm mind. To give an example, you can pay off all $6,000 of the student loan in one lump sum and not pay it in installments spanning over five years. A 3.76 percent fixed interest rate is provided by federal loans. It means a saving of $480 within the first year, if one assumes a return of eight percent. The investment will increase to $8,816 within a span of five years at the same growth rate. This covers what will be lost in the student loan interest.