“In a perfect world, people entering retirement would have a house they own free and clear, several streams of reliable, predictable income, and no debt.” Lawrence Castillo

Unfortunately, the reality is a lot different for those retiring now and who will retire soon. A recent survey conducted by Pew Research indicates that over 40 percent of Baby Boomers have credit card debt as they near retirement. The median balance of that debt is around $4,000.

35 percent of those surveyed also had car loans with balances in the thousands, while another 13% had student loans and other education debt. Consumer debt in retirement means a reduction in monthly cash flow. Reducing cash flow makes it harder to deal with health care issues, pay for leisure activities and vacations, or deal with emergencies.

Carrying debt into retirement can also force retirees to draw down their accounts and pensions much faster than they planned. Debts are stressful enough when a person is still employed. That anxiety multiplies once someone retires.

Interest rates on debt tend to exceed earnings on retirement investments. By some estimates, over 70% of Americans haven’t saved enough for retirement in the first place, so layering debt on top of this shortfall seems a sure recipe for disaster.

What can people within five years of retiring do to eliminate all or most of their debt?

What can you do right now to increase your chances of a successful life after work by eliminating debt?

Train yourself now to live on less later. If you are still working but are looking forward to retiring in five to seven years, it’s a great time to train yourself to live on a fixed income.

Pay off debt strategically. A popular method advocated by many financial educators is to pay down high-interest-rate debt as fast as possible. Working on the high-interest debt first makes sense from a purely mathematical point of view. However, you should not overlook the psychological components of debt reduction.

If you need to be encouraged and motivated, you might want to consider paying off small balances first. These little “victories” can give you a feeling of accomplishment.

Delay your retirement if you can. Putting off retirement is probably not an appealing solution to many people. I mean, who wants to work longer than necessary, especially if you aren’t that happy in your career? But, if you are carrying a load of debt, do you want to drag that with you? Working even two years past your original target date can do wonders to help you pay off your bills.

Retirement plan distributions. If you are already retired but feeling the weight of debt payments pressing down on you, you could use proceeds from qualified plan distributions or pensions to pay down your bills. If you have money in certain kinds of annuities or life insurance policies, you might be able to access part of this money to reduce account balances. Consult your tax planner or advisor to understand potential tax issues from taking higher distributions.

Debt in your later years.

Some people may wonder if it is even worth trying to get out of debt when you are in your late 60s, 70s, or 80s. Is it better to simply make the minimum payments and let those debts die when you die?

Each state has laws regarding how long creditors have to make claims against a deceased’s estates. Typically, an estate is required to repay debts, including medical bills, before heirs can receive their inheritance. If you have loans with a co-signer or joint account holder, that person will still be responsible for that debt. If your family is concerned that your family will be left with nothing when your creditors are all paid off, you might consider protecting them with a life insurance policy.

Whatever way you choose to approach debt as you enter your later years, you should seek the wise counsel.

(Lawrence Castillo is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management. L and C Retirement Income Planners, 4801 Lang St., NE, Ste. 100, Albuquerque, NM, 87109, 798-2592, lawrencecastillo.retirevillage.com.)