Options to reduce debt before retirement

Last week I talked about why debt is on the rise and why more and more Canadians may not be retiring debt-free. More and more people I talk to in my retirement workshops are concerned about how their debt levels will affect their retirement plans.

One of my readers asked a great great question worth tackling: “So how can we reduce debt as we near retirement? What are our options?”

Although debt may negatively affect Canadian’s plans to retire, there are options to still manage or reduce the debt and still make retirement feasible.


For most people, downsizing means selling a large, family-style home and buying a smaller house that is more suited to retirement. While downsizing may appear to be an intuitive solution, it may or may not help with the finances as much as you might think.

Related article: Downsizing may not be the best solution for retirement

Work in retirement

At one time, working in retirement was not desirable. Retirement really meant “not working”. Times have changed and one of the biggest changing trends in retirement is more people are planning to work in retirement.

Today, retirees are younger than ever in every aspect and because of early retirement and longevity, retirement is no longer about not working. Many studies suggest that 50% to 75% of boomers plan to and will do some form of work in retirement and it can be a great solution to help reduce debt levels or manage debt payments.

Related article: Tips for working in retirement

Delay retirement

Rein Selles, my co-author for 10 things I Wish Someone Told Me About Retirement often says that retirement should be your ‘preferred lifestyle’. In other words, why would you retire if you could not see retirement as a better life than what you have now? And if you can’t see your life in retirement as better, then the safest course of action is to keep working.

Sometimes we see people in a hurry to retire because they hate their jobs or they are not happy with their lives hoping that retirement would bring something better. Far too often, these people realize the grass is not greener and the most important thing to getting ready to retire is to make sure you have something to retire to and not just a reason to retire from something.

We’ve seen people regret the decision to retire and wish they would have delayed retirement a little longer. Obviously delaying retirement is a great way to focus on paying down debts before retirement.

Related article: Who says you need to stop working at 65?

Pay down debt before saving

If you think about it, the years just before you retire are typically your point of highest discretionary income. In other words, you are at the peak of your earnings and your expense may be lower because of kids becoming independent.

These are great years to not only practice retirement but also to pay down debts. Far too often I see people saving money for retirement when they should really pay down their debts first

Related article: Paying down debts can be one of your best investments

My five cents

Remember . . . less debt is better than more debt and the best debt of all is no debt. In preparation for retirement, it’s ideal to reduce debts to the ultimate goal of being completely debt-free.

I’ve shared a few of the more common ways to reduce debt before you retire. Can you think of any other strategies to reduce debt for retirement?


  1. Connie Solidad

    I love the thought that retirement should be our “preferred lifestyle”. For me, it doesn’t mean not working, it means I work because I choose to, not because I have to. It means that instead of having to sell my time to an employer, I can use my time as I choose.

    Thanks for a great article!

  2. Jeff Ehrlich

    I feel it should be the goal of every individual or couple to retire with NO debt and that would include the mortgage. All of your ideas are great alternatives to actually retiring. My suggestion is to get involved in a program like Dave Ramsey’s Financial Peace University or our Free 40-week program, Becoming Debt Free, God’s Way. I have found most couples do not have an Emergency Fund or are not on a Spend every Penny Budget. Most couples live beyond their means and don’t even have money to invest. They need to get on a plan now and it is never too late. My wife and I finally started getting our act together at 55.

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