Refinancing to Prepare for Retirement

There have been many stories in the news about the struggle of senior citizens trying to live purely on Social Security. According to ssa.gov, 46% of single, retired Americans rely on Social Security for most of their income, but the average monthly Social Security payout is only $1,269. Unfortunately, that may not cover many people’s expenses or way of living that they may have become accustomed to before retiring.

One tool that some advisors use is replacement income. The idea is that, in retirement, your income should be 70% of your pre-retirement income. This calculation is only an estimate, but it was recently reported on researchscape.com that, on average, only the states of Nevada and Hawaii have seniors living at that rate. Many states in New England have seniors living at 50% of pre-retirement income.

And even if you do everything right, like spend conservatively and put money into 401(k) plans that offer corporate matching or IRAs, there are things in life that can’t be predicted. Many seniors have medical expenses that aren’t covered by their insurance or Medicare. They find themselves using their savings to pay for these unplanned expenses instead of using the money to travel or pursue interests.

Advantages and Disadvantages

Here are some of the advantages and disadvantages of refinancing to prepare for retirement.

 

Is Refinancing Right For You?

In a perfect world, people would be able to save for retirement and not use up their savings, but if you’re approaching retirement and would like to explore refinancing to reduce your interest rate or shorten your term, we are ready to help you.


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