WHY YOU SHOULD BE DEBT-FREE IN RETIREMENT

Being debt-free in retirement is the best course of action, and we have strategies for you to make that happen. Nevertheless, if you already find yourself servicing debt in retirement, there are strategies for that too

- Meghna Maiti

When the Reserve Bank of India (RBI) raised interest rates by 2.5 percentage points between May 2022 and February 2023, Kolkata-based Sanjay Chatterjee (53) had to make a decision about his home loan. He realised that if he extended his tenure to keep his equated monthly instalments (EMIS) the same, he would be able to repay his home loan only by the time he was 64 years old.

Chatterjee, a government employee, did not want to extend his loan beyond his retirement years and has, therefore, increased his EMI to ensure his home loan gets over by the time he retires. This meant cutting down and compromising on his regular expenses.

In India, living with debt has become a reality with people having various forms of debt, such as home loan, car loan, personal loan, credit card debt and so on. But does continuing your debt payments after you retire make sense or should you aim to be debt-free in retirement?

Says Col. Sanjeev Govila (retd), certified financial planner (CFP) and CEO, Hum Fauji Initiatives, a financial advisory firm, "Being debtfree after retirement allows retirees to focus on their aspirations without worrying about EMIs eating into their limited resources."

Sanjay says that though he plans to be engaged in some activity postretirement, he does not want the burden of a home EMI on him after he retires from his job.

WHY RETIREMENT SHOULD BE DEBT-FREE

Your retirement years should be the time to enjoy life without the burden of debt obligations. However, the decision to be debt-free by the time you retire may vary based on individual circumstances, including income sources, lifestyle expectations, and financial goals.