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Roughly 77% of Americans surveyed say debt is preventing them from saving adequately for retirement. This is a strong reminder that saving for retirement is not always as simple as contributing more to your 401(k). If debt stands between you and the retirement you want, there are ways to manage it wisely while still planning for the future.

In this episode of Money Wisdom, Nicholas J. Colantuono, CFP® and Eric Hogarth, CFP® explore how debt can affect retirement savings and financial confidence.

How Debt Can Hinder Saving for Retirement

Debt remains one of the biggest obstacles for people approaching retirement. Carrying significant debt can limit cash flow, reduce savings opportunities, and create uncertainty about whether retirement is financially possible.

When preparing for retirement, you may be eager to explore 401(k) options, Roth accounts, and other ways to grow your wealth. But first, you need to build protection against unexpected expenses. Without an emergency fund, a major home repair or a totaled car can lead to new debt. On top of that, interest payments and poor cash flow can continue to erode your savings progress.

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Ways to Manage Debt Before Retirement

1. Prioritize High-Interest Debt

While some debt is more manageable than others, the goal is to enter retirement with as little debt as possible. You may not need to pay off a low-interest mortgage immediately. However, you should prioritize paying off high-interest credit card debt. This type of debt can be especially damaging, with interest costs often outweighing the benefits of saving or investing elsewhere.

The challenge is that debt affects more than just your account balances. It can impact your monthly cash flow, increase financial stress, and sometimes delay retirement. Even if you have enough saved, your lifestyle can be harder to sustain when a large portion of your expenses goes toward debt repayment.

2. Create A Debt Repayment Strategy

When developing a debt repayment strategy, it’s important to prioritize certain debts over others. Some debts, such as a low-interest mortgage or promotional 0% financing, may not require immediate attention. On the other hand, you should address higher-interest debt, particularly credit cards, first.

Two common repayment strategies are the snowball method and the avalanche method. The snowball method focuses on paying off smaller balances first. This creates quick wins and builds momentum. The avalanche method targets the highest-interest debts first, which may save more money in the long run.

3. Balance Your Retirement Planning Priorities

When managing debt before retirement, there are the tradeoffs to be aware of. Every dollar you direct toward debt repayment is a dollar that you aren’t investing elsewhere. Retirement planning is ultimately about balancing competing priorities and creating a roadmap that fits your goals. With professional guidance and a clear strategy for managing debt, you can navigate the road ahead with confidence.