The Retirement Catch-Up Plan: Using a Personal Loan to Eliminate Costly Debt Faster

Many Americans aren’t saving enough for retirement. For those starting late, the challenge of saving enough may seem daunting, considering other financial obligations and economic disruptions beyond their control.

The growing retirement savings gap

Many Americans have less than the recommended amount saved for retirement. To retire comfortably, most experts say you’ll need about six times your annual salary by age 50 and 10 times that amount by age 67.

Using this rule, someone earning $150,000 at age 50 would need to have saved $900,000 to be considered “on track.” Sadly, many are behind the recommended savings goal at this stage. Federal Reserve data says the median retirement savings for Americans aged 55 to 64 is just $185,000.

So it comes as no surprise that more than half of Gen X’ers—the generation set to retire next—believe they will not be financially prepared for retirement when the time comes, according to a recent Northwestern Mutual survey.

Putting aside enough money to retire can be tough, especially if you start late. Economic problems, like job losses or costly unexpected expenses, also make it harder to save consistently and catch up.

High-interest debt: A hidden barrier to retirement

One of the most significant obstacles hindering Americans from saving adequately for retirement is high-interest debt from credit cards, medical bills, and other loans. These types of debt come with consistently high rates, which can consume a substantial portion of your income and leave less money available to put toward retirement savings. In fact, research from the Transamerica Center for Retirement Studies states that 53% of workers of all ages say that debt is interfering with their ability to save for retirement.

Beyond the direct financial impact of delayed saving, there’s an emotional toll associated with carrying high-interest debt. The constant pressure of juggling debt, your daily budget, and family needs is mentally taxing and a psychological trigger for many.

Having a retirement catch-up plan in place, like the one we discuss below, can help you alleviate emotional and financial stress now and for years to come.

A retirement catch-up plan is a strategy designed to help you save more for retirement, particularly if you started late or experience setbacks.

The concept of "catching up" financially

To support individuals who may start saving for retirement later or experience periods when they cannot save as much as they would like, the IRS allows those aged 50 and older to make catch-up contributions to specific retirement savings plans, including 401(k) plans and IRAs.

In 2025, you can contribute up to $23,500 each year to your 401(k). However, those age 50 and older can contribute an additional $7,500 to help boost their savings. For IRAs, the regular contribution is $7,000, plus an additional catch-up contribution of $1,000 for those 50 and older.

Even if you’re not yet eligible to make catch-up contributions, it’s essential to prioritize eliminating high-interest debt now so you can free up more funds to maximize contributions as much as possible later.

Creating space to save more

Managing high-interest debt leaves little room in your budget for making meaningful contributions to retirement savings. But once you eliminate or reduce these payments, you can redirect the funds to more productive financial goals.

Even better, reducing your debt burden can act as a launchpad for implementing smarter money management strategies once you have more room in your budget. When debt no longer competes with your goals, you can double down on recommended saving strategies, such as automating transfers to investment accounts or exploring other investment opportunities you wouldn’t have been able to consider before.

Reducing and eliminating high-interest debt doesn’t just create financial stability; it also helps set you on a path toward financial freedom, allowing you to allocate more resources to retirement.

The debt consolidation advantage

A personal loan for debt consolidation rolls multiple debt payments into one. Instead of submitting multiple payments to different companies, you make a single payment to the personal loan lender.

These loans also come with a fixed interest rate and a set term. This gives you a level of predictability that’s often lacking with credit cards, where interest rates can fluctuate, and minimum payments can vary based on the outstanding balance.

Comparing interest rates: Credit cards vs. personal loans

Personal loans (like BHG’s) offer low, fixed rates for qualified borrowers. The average credit card annual percentage rate (APR) is typically more than 20%, according to Federal Reserve data. In contrast, personal loan APRs are usually much lower, especially if you have good credit. Refinancing to a loan with a rate that’s even one percent lower can result in significant savings over the life of the loan.

Real impact: How this strategy saves you money

If you have several high-interest variable-rate balances across multiple credit cards, you’re likely paying hundreds of dollars in interest each month. If you get a personal loan to consolidate those debts, you could secure a much lower interest rate. This lowers your monthly payments and your total interest, making it easier to pay off debt faster.

BHG Financial offers personal loans that are designed for high-earning professionals who want to take back their financial well-being and have enough room in their budget to save for retirement. Here’s what makes BHG different.

Tailored for high-earning professionals

Unlike some lenders that rely heavily on credit scores as the primary indicator of creditworthiness, BHG Financial takes a more holistic approach. They consider a broader range of factors when assessing loan applications, such as income stability, earning potential, and overall financial profile. This benefits prime borrowers who may have accumulated high debt balances but demonstrate a strong capacity to repay what they borrow.

Additionally, BHG loans offer flexible repayment terms¹ that can extend up to 10 years.^1,2 Longer repayment terms help keep monthly payments affordable, even when consolidating a substantial amount of debt.

Fast approval and funding timeline

BHG’s approval process is fast.³ In many cases, applicants can get a loan approval decision in as little as 24 hours.³ Borrowers can typically expect to receive their funds within five business days of approval,³ helping them avoid further high-interest charges and begin the path toward becoming debt-free sooner.

No collateral required

Personal loans from BHG are unsecured, meaning that borrowers are not required to pledge personal assets, such as their home or car, to secure the loan. Unsecured loans are an ideal option for consolidating without risking assets.

Preparing for retirement while juggling high-interest debt can feel like an uphill battle, but making smart choices now to become debt-free can help set you up for a stress-free retirement.

The link between debt freedom and wealth building

Becoming debt-free lays the groundwork for long-term wealth building, especially when it comes to retirement. As you eliminate high-interest debt, the funds you were using to pay it off become available for other investments and savings contributions, such as an emergency fund or 529 plan for a family member’s education.

What’s more, successfully managing debt can lead to an improved credit score. A higher score translates to better borrowing power in the future, including lower interest rates and more favorable terms on loan products and mortgage refinancing.

Building your post-debt financial plan

Once you’re out of debt, it’s crucial to have a plan in place for maximizing your retirement savings. For example, you can start allocating the money you used for debt payments into your retirement accounts, like your IRA, 401(k), or other brokerage accounts.

Work with a financial advisor to set long-term goals and build a strategic investment plan that aligns with your risk tolerance and desired retirement lifestyle. This can include increasing contributions to your 401(k) plan as your budget allows, taking advantage of catch-up contributions (for those 50 and older), or investing in taxable brokerage accounts.

A personal loan can be a great solution for fast-tracking financial well-being, allowing you to focus on retirement planning. However, it’s important to make sure a personal loan is the right choice for you.

Key considerations before applying

Before getting a personal loan, consider how the loan will fit into your overall financial goals. Understanding a lender's personal loan requirements helps you find which lenders are most likely to approve your application.

• Your budget and goals: Determine how much you need to borrow and how long it will take to repay it. Not all lenders offer the same loan amounts. For example, BHG offers higher loan amounts than many other lenders, up to $250,000.¹
• Interest rates and loan terms: The interest rate, loan amount, and length of the loan will affect your monthly payment and total borrowing cost. Consolidating debt at a lower rate may save you money in the long run.
• Eligibility requirements: Lender loan requirements vary, but most lenders want to see a higher credit score, consistent income, and a positive payment history to determine eligibility. Some consideration is also given to your debt-to-income ratio (DTI).

How to apply for a BHG personal loan

Applying for a refinancing loan with BHG is designed to be straightforward. With BHG, you prequalify online in minutes, and then compare available loan options without affecting your credit score.⁴

BHG offers personalized support and loan terms. Dedicated loan specialists are available to answer questions throughout the process, helping you find the best solution to maximize your monthly savings potential and accelerate payoff timelines.