Debt in Retirement - Liability Management

Retirement? How often we wish to have a retired life, free from all tensions and work pressures. Some have a vision of relaxing on a beach, travelling all over the World or simply relaxing with a coffee in hand! Some want to do social work for which they were not able to find time during their hectic professional life. But what if there is a huge debt with an impending EMI during our retirement days. Would that not be a spoiler. What can we do to avoid that?

How could we land up in debt during retirement?

There can be multiple reasons.

  • Marrying at a late age could mean some of our obligations like children, their education, marriage etc happening late which could mean taking up debt at a later age and therefore the EMIs spilling over to the retirement time.
  • Lavish lifestyle during the working years with low or no investments could mean loans to pay off debt even in the golden years.
  • No work life balance during the working years could lead to burnout and therefore early retirement (could be forced retirement) and with loans still not paid off, thus increasing the burden.
  • Becoming a self-employed professional after retirement could mean taking up additional loans.
  • Not doing financial planning well enough during your professional life.
  • Switching on to an extravagant lifestyle once retired may mean difficulties in making ends meet.
  • There could be a lot of other reasons too.

What can you do?

If you are staring at your retirement and notice that you still have debt, there are a number of options which you can evaluate.

  • Continue with the loan and the EMIs. Some of us are comfortable with paying the EMIs. If you are the type who does not get hassled with loans, then you may just want to continue with it. Especially so if your investments are generating more returns than the interest which you pay on the loans.
  • However, if you do decide to pay off your loan, then consider to retire most expensive loans first and especially those which could be lifestyle funding loans like credit cards or personal loans which are in all likelihood likely to be more expensive than other loans.
  • Pay off the loan with the retirement corpus you may receive and get the stress off, but do note that this would mean a lower corpus with you for investment which may not be fully able to fund your retirement needs. Do work with your financial advisor and understanding the workings before you take this decision.
  • If possible, delay your retirement or look out for an alternate job which could boost up your cash flow.
  • If at your retirement, your financial picture does not look too rosy, do know that you can utilize your equity in the house you may own by opting for a reverse mortgage which is now gaining popularity.


Whatever decision you take, whether you to close off or continue with your debt, do take into account other facts which may or may not be your control which can completely change all your calculations and workings.  A few examples of such change in circumstances are additional health-related expenses which were not planned, inflationary pressures, decline in investment returns. Maintaining a healthy credit score is necessary even during retirement, so do keep a watch over it.

Whatever be your strategy towards maintaining debt, good planning will ensure a healthy stress-free life wherein you could then put up your feet on the table and relax!




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