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Whether you get to finally travel more, pick up a hobby you’ve always put off, or simply enjoy slower mornings, retirement can open the door to new beginnings. But for many, it also comes with some lingering financial commitments. If that's you, you're not alone.
Managing these obligations doesn’t have to overshadow your plans. Taking a closer look at how debt fits into your retirement plan can help you make confident decisions that support your retirement goals.
How Debt Impacts Retirement Savings
The total household debt in the United States increased to $18.20 trillion in the first quarter of 2025.2
- Monthly payments on credit cards, personal loans, and student debt can divert money that would otherwise go toward retirement savings, especially during your peak earning years when contributions tend to matter most.
- Carrying high-interest consumer debt often means more of your budget goes to interest charges instead of building your future income, shrinking the long-term impact of your savings.
- Having significant debt can increase your reliance on early withdrawals from retirement accounts, which may trigger taxes, penalties, and reduce the future growth of your savings.
The longer you carry a balance, the harder it may be to catch up, and missed opportunities for compound growth could result in a lower retirement income down the road.
Common Types of Debt in Retirement
- Credit card debt: This is the most common type of debt carried by adults age 50 and older.3 Often revolving, high-interest debt that can linger due to essential and discretionary expenses.
- Mortgage debt: Despite exiting the workforce, many retirees continue making monthly mortgage payments, which can limit financial flexibility on a fixed income. In 2019, roughly 1 in 4 older adults are paying a mortgage after age 65.4
- Auto loans: Auto loan balances often follow individuals into retirement, representing a substantial share of monthly expenses beyond housing costs.
- Student loans: Whether from their own education or loans taken out for children, student debt has become an unexpected burden for many older adults.
- Personal loans: Commonly used for debt consolidation or financial emergencies, personal loans can carry into retirement and add pressure to already tight budgets.
Consider using our Pay off Debt or Invest Calculator!
U.S. Household Debt
5 Steps to Help You Reduce Debt Without Sacrificing Retirement Savings
Now that you know what types of debt you're carrying and how they affect your ability to save, you may be wondering what to do next. The good news is there are steps you can take to lighten your debt load without putting your retirement savings on hold.
Step 1: Get A Clear Picture of Your Financial Reality
Before you can move forward, you need a full picture of where you stand. Start by adding up all your household debt, this includes your credit card balance, auto loan balance, mortgage loan, student loans, and any other debt obligations. Then, take stock of your savings, retirement accounts (401ks, Roth IRA), and regular income, including pensions or Social Security.
Understanding your full financial landscape is the first step toward building vital money management habits and getting your debt under control.
Step 2: Envision the Retirement You Want
Your retirement goals should help shape your debt strategy. Do you want to travel, downsize, or work part-time? Different goals come with different costs and different timelines.
Think about how debt in retirement could limit your options. By identifying what matters most, you can start to see how certain kinds of debt should be addressed to help you move closer to the lifestyle you want.
Step 3: Reassess Your Retirement Timeline and Goals
It’s okay to revisit your timeline if debt is holding you back. Consider whether adjusting your retirement age or reducing your savings target might give you more flexibility.
Factor in additional debt payments when estimating future retirement income and make sure your plan still accounts for income on housing, income taxes, and your marginal income tax bracket.
A clear, flexible approach can help reduce the pressure that debt forces can place on your retirement outlook.
Step 4: Make a Strategic Debt Reduction Plan
Not all debt is equal, so choose your repayment strategy carefully. Some may start with the highest-interest debt, using the avalanche method to minimize interest. Others may prefer the momentum of the snowball method, starting with smaller balances.
Consider loan consolidation offers or refinancing into low-rate and fixed-rate debt to lower the cost of money over time. You may also explore a debt management plan if you're looking for structure and support. Whatever you choose, consistency is key.
Step 5: Build a Future-Focused Budget
A good budget balances today's needs with tomorrow's goals. Create a plan that includes retirement contributions, minimum payments, and room for extra money to tackle debt or unexpected expenses.
Automating your savings and payments can help reduce stress and ensure you stay on track. Building this financial rhythm supports both your debt reduction and retirement planning, while keeping your money diversified, liquid, and working for you.
Final Thoughts
Debt and retirement don’t have to work against each other. By identifying the types of debt that can weigh down your savings goals, and using practical strategies to reduce what you owe, you can begin to bring your financial goals back into alignment.
It’s not about perfection. It’s about small, steady steps. Whether you’re managing high-interest debt, exploring options for credit card debt forgiveness, or setting new debt reduction goals, now may be the time to put a plan into motion.
See how small steps today could lead to smarter retirement choices. Get My Free Financial Review
Sources
1. Center for Retirement Research (2023). Profiling Retirees Who Carry too Much Debt. https://crr.bc.edu/profiling-retirees-who-carry-too-much-debt/
2. Federal Reserve Bank of New York (2025). Household Debt and Credit Report (Q1 2025). https://www.newyorkfed.org/microeconomics/hhdc
3. AARP (2025). Credit Card Debt and Adults age 50-Plus. https://www.aarp.org/pri/topics/work-finances-retirement/financial-security-retirement/credit-card-debt-survey/
4. National Council on Aging (2024). Get the Facts on Senior Debt. https://www.ncoa.org/article/get-the-facts-on-senior-debt/
