Retirement Looming? 4 Ways an Amortized Loan Could Help Now

As they approach their target retirement date, many Americans find themselves still not quite financially ready to let go of that full-time paycheck. If you are in this situation, what can you do to boost your financial resources if you only have two or three years to get it right? 

One tool that few soon-to-be retirees consider is the strategic use of an amortized loan. What could this type of controlled loan do for you? Here are four ideas to think about depending on your personal financial challenges. 

1. Retire High-Interest Debt

The number one way to use an amortized loan is to pay off higher interest or dangerous debt. If you have high-interest credit cards or non-dischargable student loan debt, an amortized loan provides a clear path to get rid of them. Unlike revolving credit (which you pay off and charge up repeatedly), a personal loan has an end date and no ability to rack up new debt. Target the loan to end before your retirement date. 

Can't retire all your debt at once? Focus on the most urgent payments or what will gain the biggest advantage. You can save more overall interest by targeting debt with the highest interest rates. Alternatively, consider paying off debt that will result in the biggest reduction of your monthly minimum obligation. This frees up the most money in your retirement budget. 

2. Force More Retirement Savings

Do you, like many Americans, have trouble maximizing your voluntary retirement savings? Consider forcing yourself to do so by turning it into a monthly obligation.

Adults over age 50 can put up to $7,000 in their IRAs and $26,000 into a 401(k) plan annually (in 2021). If you contribute a one-time lump sum, your contribution starts growing immediately. And you have a mandatory monthly payment which takes the decision-making out of your hands. Most people are more likely to make that a payment each month than to voluntarily add to their savings. 

3. Buy Service Credit

Some pension plans allow employees to increase their future retirement checks by purchasing additional service credits. How does this work? The employee — either at any time during their employment or upon separating — is allowed to pay a designated amount of money to get more credits for their years of service. Since pension checks are based on years of service, this means a bigger lifelong check. 

This tactic could net a great benefit because the higher checks usually outweigh the money spent to buy the credits. If this is the case for you, you might take on a loan before retirement to fund this purchase and pay it off before you leave employment. 

4. Delay Social Security

The longer a new retiree delays the start of Social Security checks, the more money they will get over the rest of their life. So if you had some cash available, could you delay this start date a little more? For instance, could you pay for most of your retirement costs using other means but still can't quite pay for 100% of them? If so, consider prepaying some of these expenses to lower your costs and delay Social Security. 

Could any of these strategies help boost your retirement confidence? If so, start by learning more about personal and amortized loan options available to you.

Ardmore Finance provides an array of loan choices that allow you to tailor the term length, size, and payments so they benefit you the most. Visit our website to get started or call to speak with a loan specialist in person. This proactive move could save your retirement for many years to come.