Juggling Debt Management and Retirement Savings Goals

With heightened inflationary pressures, escalating housing costs and rising food prices, debt has become an unavoidable reality for many these days. It can not only strain household budgets, but also take a toll on your investment and retirement savings strategies. That’s why, at Merit Wealth Advisors, we always address debt as a central component of our clients’ comprehensive financial planning strategy.

When you carry excessive debt, it’s not just monthly payments that can create problems. According to Bankrate, the current average credit card interest rate sits just above 20%. And with interest payments compounded on debt that’s carried from month to month, it can take a big chunk out of your bottom line, eating away at your financial resources.

Consider the opportunity cost of carrying debt. Every dollar spent on debt repayment is a dollar that could have been put toward your savings and investment goals. And shortfalls in your retirement savings can mean significant compromises to your lifestyle during your golden years. It may result in having to work longer, downsize, move to an area with a lower cost of living or forego that island-hopping Caribbean cruise you’ve always dreamed of.

The type of debt you carry matters, and it will affect how it’s treated in your financial plan. Some debt, such as a mortgage for a primary residence, generally carries a lower interest rate and may offer tax or other benefits — although you can also carry too much mortgage debt for your income. Our advisors can help you differentiate between “good” and “bad” debt and prioritize repayment accordingly in your debt management strategy.

At Merit Wealth Advisors, we take a holistic approach to growing wealth. We understand there’s no one-size-fits-all solution to handling debt and recognize that each individual’s financial situation is unique. Our experienced fiduciary advisors will work closely with you to assess your financial goals, risk tolerance and debt obligations to create a customized debt-management strategy.

There are a variety of paydown methods that can be used to manage debt. Each individual may have different options at their disposal in terms of debt consolidation — or even possibly using a home equity line of credit. We’ll help you explore all your options and work with you to create a budget that allows for both debt reduction and saving for the future.

Managing debt effectively is an essential component to achieving long-term financial objectives — including saving for retirement. When debt is out of control, it’s like trying to fill a leaky bucket, with money going out as fast as it comes in. Merit Wealth Advisors can help you fix your leaky bucket and regain control of your financial future.