We often remind our clients that entering retirement without debt is one of the smartest steps you can take. Not only is debt stressful and costly; you’ll enjoy your retirement income much more if you feel free of prior obligations. However, not all retirees were able to follow this advice, and some even incur more debts after retirement.

A recent study by the Employment Benefit Research Institute found that many retirees between the ages of 62 and 75 are carrying debt. The most common type of debt held by retirees is credit card debt, with about 40 percent of retirees reporting this type.

After credit cards, a mortgage was the second most common type of debt, with 30 percent of study participants still carrying a mortgage on their homes.

And then, of course, were car loans. Unless you have enough money to pay cash for a car, you will probably finance one. The study found that 23 percent of retirees still make a car payment each month.

Other types of debt held by retirees included medical debt (11 percent), home equity loans (7 percent), student loans (4 percent) and business loans (1 percent).

A debt-free retirement is a dream for many, but what if that’s just not possible for you? The most important debt to focus on paying down is usually credit cards. That’s because interest compounds on outstanding balances, meaning you end up paying interest upon interest. With mortgages and car loans, at least the loan is repaid after a specific period of time.

In the case of mortgages, the interest you pay is deductible on your federal income tax return (if you itemize returns). A mortgage is actually considered by some to be a “good” form of debt. Interest rates are also usually fixed, and much lower than those of credit cards or car loans.

For more guidance on retirement and debt, make sure to schedule regular appointments with us. We can help you devise a strategy to pay down debts before you retire, and to hopefully avoid taking on new debts afterward.