Retire debt-free forever by following these practical and effective tips

Depending on the type and amount of debt, debt can set you back financially in retirement, eating away at your steady income.

A recent study from Vanguard found that of all generations, Millennials and Gen

Retirees may find it difficult to pay off debt, because they no longer receive a regular salary or receive raises.

“Non-mortgage debt in retirement, such as credit cards, car loans or personal loans, creates pressure on cash flow at a time when income is steady and predictable,” said Nathan Sebesta, a certified financial planner and owner of Access Wealth Strategies. “Every dollar that goes to interest is a dollar that does not support health care, lifestyle or legacy goals.”

These tips can help you deal with your debt.

Prioritize high-interest debt

High-interest debt, in particular, can be harmful to retirees. The interest rate that retirees pay on this type of debt is usually greater than the annual return they earn on their investment portfolio.

According to the Federal Reserve, the average APR across all credit cards as of August 2025 was a staggering 21.39%. In contrast, the average annual total return for the S&P 500 was 12.18% over the 15 years through November 10th.

“The overlooked factor is how much they care [pre-retirees] “They’re paying off their consumer debt for the average rate of return they’re getting on their investments,” said Bill Shafransky, senior wealth advisor at MONECO Advisors.

In order to develop a debt payoff strategy, Sebesta suggests getting a complete picture of your finances before you’re ready to retire.

“My advice to retirees is simple: Know your numbers early,” Sebasta said. “Build a realistic retirement budget, list each debt with balances, rates and payments, and create a repayment plan that starts with the highest interest or smallest debt to build momentum.”

The avalanche method, in particular, can help reduce the total amount of interest you pay on your debt, as this method prioritizes paying off debt with the highest interest rate.

Using the avalanche method, you make at least the minimum payment on each type of debt, and put any remaining money toward the highest-interest debt. After you pay off the balance with the highest interest rate, you can put any excess money into the balance with the next highest interest rate, and continue doing so until you’ve paid off the entire debt at the lowest rate.

Consider using a balance transfer card for credit card debt

Balance transfer cards may not be the right choice for everyone, but they can reduce the total amount of interest you pay if you’re strategic.

With a balance transfer credit card, you can transfer the balance of one credit card to another, usually for a fee ranging from 2% to 5% of the balance. When you transfer a balance, you’ll be given an introductory period, usually lasting six to 18 months, during which the APR can be as low as 0%.

Before transferring your money, compare the cost of balance transfer fees to the amount you’ll save in interest. If you’ll save more than you would on fees, consider applying. To qualify, you’ll usually need a strong credit score.

Finally, make a plan to pay off the entire balance during the introductory period. When the introductory 0% APR period ends, your APR will increase and you could find yourself paying high interest rates again if your balance doesn’t get paid off.