Don’t Retire Until These 2 Things Are Paid Out

Leaving those accounts open could tarnish your golden years

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Millions of Canadians spend their working days dreaming of retirement. Yet millions of Canadians too may overlook the crucial financial steps they must take to become retired.

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Although many understand the importance of paying off loans, they often focus on the bad – prioritizing their mortgages, which have lower interest rates, over expensive high-interest accounts. .

Here are the two loans that Canadians have to repay before they even considering retirement.

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Personal loans and credit cards

Personal loans and credit cards generally have the highest interest rates. This is especially true for credit cards, which typically have an average interest rate of 19.99-22.99% in Canada.

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Personal expenses can also end up on a credit card, such as moving and wedding expenses or funeral expenses and unexpected expenses. While these credit card balances need to be paid off quickly, you shouldn’t let them delay saving for your retirement.

Instead, consider lowering your mortgage payments to use those funds to pay off other high-interest loans.

Mortgages have lower interest rates, which will allow you to preserve your savings and pay off your debts. From there, start putting money aside in an emergency fund with about three months’ salary. That way, if unexpected expenses come your way, you’ll be prepared.

Car loans

Finally, auto loans are another area to pay off before retirement. In July 2022, the average interest rate for a car loan was 6.62%, according to Statistics Canada.

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But if you have bad credit, it goes up to 19%. That’s about as much as the interest rate on a credit card.

In addition, you will have to take these payments into account for your retirement. If $400 is spent paying for a car, $300 for a credit card and more for a line of credit, you suddenly have a lot less cash on hand for your retirement.

If you delay your retirement to pay off these loans, setting aside wages to pay them back, you could save thousands in interest and create a cushion for your retirement.

What about my mortgage?

So why not pay off your mortgage too? It’s not just about lower interest rates, although with the national average mortgage rate for a 5-year term set at around 6.14%, that’s a plus.

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While you may be inclined to pay off your home loan, pay off high-interest loans, or put extra money into your retirement fund and let it grow, the strategy most likely to get you closer to retirement and your dream of really achieve financial freedom.

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This article was created by Wise Publishing. Wise is dedicated to providing information that helps readers navigate the complex landscape of personal finance. Wise only partners with brands it trusts and which it believes can be useful to the reader. This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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