Managing Debt in Your 50s and 60s: What High Earners Need to Know About Loan Refinancing

Debt can affect your life at any age. However, as you enter your 50s and 60s, its impact can become even more profound. At this point in your life, you’re likely focused on a financially secure retirement, and owing money may interfere with your ability to achieve that. Fortunately, it is possible to pay down your debt and set yourself up for success when you leave the workforce.

The financial reality of high earners nearing retirement

There’s a good chance your finances look different as you approach retirement than they did when you were in your 30s and 40s, especially if you’re used to a high income. Now, you may be forced to navigate expenses, such as your mortgage and children’s college while transitioning to a time where you’ll have a fixed income, rather than new funds coming in every month.

Common debt types at this stage of life

It’s not uncommon to carry different types of debt in your 50s and 60s, such as:

• Credit card debt: According to an AARP survey, almost half of adults in the 50- and- up age bracket have credit card debt. Depending on your situation, you may use credit cards to cover basic living expenses, emergencies, or both.
• Second mortgage debt: If you’ve built equity in your home, you might take out a second mortgage, such as a home equity line of credit (HELOC) to pay for a home renovation or another big-ticket purchase. Since a second mortgage usually comes with variable interest rates that can go up and down based on the market as well as a draw period where you only owe interest, they can be difficult to repay.
• Medical debt: Even if you have health insurance, healthcare costs can add up quickly as they usually increase with age. In fact, a KFF analysis found that people in the U.S. who are over 50 years old account for more than half of total health spending, even though they only make 31% of the population.
• Business loan debt: If you’re an entrepreneur, business owner, or self-employed, you may have used a business loan to help launch or grow your venture. It can be difficult to pay back this type of financing, especially if you’re dealing with cash flow issues or unexpected hurdles that have taken a toll on your bottom line.

How interest accumulates—and hurts retirement plans

Unfortunately, a high interest rate on a loan will lead to larger monthly payments and increase your overall cost of borrowing. For example, imagine you have $27,845 in credit card debt with a 27.89% APR. If you make your monthly payment of $1,150 over 36 months, you’ll have paid $13,559.14 in interest.

If you refinance your credit card debt through a personal loan with a 12.18% APR, your monthly payments will go down to $927. Over a 36-month period, your total interest charges will come to $5,535.93. By simply refinancing, you’ll have saved $8,023.21, which you can put toward your retirement savings or any other financial goals you might have.

Emotional stress and missed investment opportunities

Debt can hinder your ability to invest for retirement. After all, when you spend your hard-earned money on loan payments, you’ll have less to contribute to your 401(k), IRA, or other retirement accounts. This can minimize long-term investment returns and, in some cases, even delay your retirement, likely resulting in financial stress.

Loan refinancing defined

Refinancing refers to the process of taking out a new loan to replace an existing one, usually to take advantage of a lower interest rate or more favorable terms. While many people associate refinancing with mortgages, it can also be used for credit card debt.

Through debt consolidation, which is a type of refinancing, you can combine all your credit card debts into one payment, streamlining the payoff process and ideally, saving money on interest charges and maybe even lowering your monthly payment by extending your terms. When used appropriately, it can be a powerful financial strategy if you’re ready to pay off debt in your 50s or 60s.

When to consider refinancing in Your 50s or 60s

To take advantage of refinancing, most lenders will check your credit and look for a high score that shows you’re a responsible borrower. They may also require proof of stable employment and a strong income. Essentially, if you’re in good financial shape at this stage in your life, you’ll likely get approved.

How consolidating debt with a personal loan can help

When you take out a debt consolidation loan, you use the funds to repay several high-interest debts, such as credit card and medical bills. From there, you’ll make one, convenient monthly payment to pay off the loan.

The goal is to simplify your debt repayment and save money on interest in the process. You may also improve your credit utilization ratio, and in turn, boost your credit score. Most importantly, however, you can free up your mental bandwidth and reduce financial stress during these critical pre-retirement years.

Why consolidation matters more as retirement approaches

While fixed-rate personal loans for debt consolidation can help anyone, they’re particularly beneficial if you’re in your peak earning years and have a specific retirement date in mind. With a debt consolidation loan, you can enjoy lower monthly payments that give you more breathing room in your budget and the opportunity to contribute more to retirement accounts or your emergency fund.

BHG’s personal loan for high-income earners

Specifically designed for professionals with strong credit profiles, BHG’s debt consolidation loan offers competitive fixed rates. Furthermore, you don’t have to provide collateral and you can access up to $250,000¹ to cover large balances across multiple accounts. Plus, the application process is fast. If approved, you can expect to receive your funds in as few as five days,² much quicker than you would with a traditional bank loan.

Boosting retirement contributions after consolidation

Once you consolidate your debt with a personal loan, you’ll have more cash at your disposal. These extra funds can give you the chance to catch up on your 401(k), IRA, or other investment accounts.

Reducing risk for fixed-income years ahead

Debt consolidation may set you up for less stress and more fulfillment in retirement. After all, the less you have to put toward loan payments, the easier it’ll be to make the most out of your fixed income and live life to the fullest.

Increasing financial confidence and peace of mind

There’s no denying that debt can make you anxious about your financial future, especially as you approach the fixed income years. Fortunately, consolidating it with a personal loan may resolve this problem, ultimately creating a clear path to a debt-free lifestyle.

By refinancing now while you’re in your peak earning years, you can streamline the debt payoff process, save a significant amount of money on interest, and catch up or simply boost your retirement savings.

As you explore your options before debt becomes a retirement hurdle, consider the BHG debt consolidation loan. You can borrow up to $250,000¹ with a low, fixed APR and get funded in as few as five days.²

If you’d like, a U.S.-based loan specialist can answer any questions you may have, make solid recommendations based on your specific circumstances and retirement goals, and guide you through the process. What are you waiting for? To get started, check your rate today, with no impact to your credit.³