Estate Planning: Lifestyle Protection

Trusts and Estates | Mark J. Ackerman | Mar 12, 2015

When we retire, we envision a life of freedom not only from the stress of work, but also freedom from debt. You can achieve this by estate planning, in terms of lifestyle protection. Unfortunately, a debt-free retirement has become less of a reality. Two-thirds of people between 65 and 74 have some sort of debt (Source: University of Michigan Retirement Research Center, September 2013). Mortgages, credit cards, and other consumer debt can create financial challenges in our golden years.

When we retire, most of us stop actively earning income and start living on savings, pensions and social security. If you still have debt, it means that from your fixed income, you still have less to spend on things you enjoy. By having no debt, we lower our living costs and allow our nest egg to last longer.


The easiest way to eliminate debt is before we retire, when our earnings are still higher than when we retire. High-interest debt, such as credit cards, should be eliminated as quickly as possible. You are never too young to get debt free. Look at where in your budget you can cut back in order to allow you to make extra debt payments. Ask yourself: “Am I living within my means or am I living within peer pressure?” Never assume that you have plenty of time to get debt free. New financial challenges arise and time goes very quickly. Getting debt free before retirement may mean aligning your mortgage payoff date with your retirement date even if it is years ahead. You may be able to bring mortgage pay off date closer by making extra payments monthly. If you have a low-interest rate, no other debt, you are maximizing your retirement savings, or feel you can get more from investing the money you’d otherwise use to make extra mortgage payments, then accelerating pay-off plan might not be for you.

One thing you should not do is take money out of retirement accounts to pay off debt. If you do that, you may run the risk of having inadequate savings when you do retire

Unfortunately, many people still end up nearing retirement with significant debt.

There are several options for those in that situation.

1. Delay retirement for a few years while concentrating on paying off debt. This allows your nest egg to continue to grow.

2. Delay claiming social security. Your monthly payments may increase by up to 8% a year until you reach age 70.

3. Downsizing your lifestyle now. Move to a smaller home, pace down your current lifestyle by giving up some of your ‘toys.’ This will allow you to reduce debt and minimize the risk of outliving your retirement savings.

4. After you retire you may be able to work as a consultant or work part-time. Many people enjoy a gradual transition to full retirement.

While most creditors cannot garnish your social security payments, the federal government is an exception. If you owe back taxes, student loans, alimony, child support, or certain other types of payments, you may lose up to 15% of your social security benefits to repay these debts.

As your proactive accounting firm, we can act as your quarterback to help you reduce debt and plan for you and your families’ future. No matter what your age, saving for your financial future starts now. Give us a call to get you on the road to a solid financial plan.


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