Image source: Getty Images

As a baby boomer myself (although one not looking to retire soon), I — and my wife — have been working to steadily reduce and retire some old debts. My exorbitant law school debt is long gone, and our home mortgage rate is as low as it can go and is almost paid off. Credit card debt is now almost non-existent.

Why? Because typically, one’s peak earning years are in their 50s, and as that decade recedes, it is smart and prudent to look to cut back wherever possible. This in turn frees up disposable income for whatever we choose to do with it.

So let’s explore which debts are the most important to eliminate prior to retirement, and how eliminating them (to the extent possible) can protect your savings, and your future.

1. High-interest credit card debt

Credit card debt is one of the most financially draining liabilities you can have due to high interest rates. As of 2024, the average American credit card APR is 23.37%. Carrying ongoing huge expenses like these can easily chip away at your retirement funds, quickly turning your nest egg into a goose egg.

Paying off revolving credit card debt should be Public Enemy No. 1 in your debt-reduction plan. At a minimum, transfer over your credit card debt to one of these balance transfer cards that we rank highly. You may be able to pay it off sooner without additional interest charges.

2. Mortgage balance

Carrying a mortgage into retirement can be manageable, but only if you have budgeted for it. Many experts suggest paying off your mortgage entirely before retirement, especially if the interest rate is high or if you will be living on a fixed income. Diverting retirement funds to pay your mortgage will limit your financial flexibility.

Now, if paying it off completely is not feasible, consider at least refinancing your home loan or downsizing to a more affordable property to keep monthly costs in check.

3. Car loans

The monthly payments on car loans can be a significant drain, particularly given that the average car loan rate ranges from a low of 5.25% to a whopping 21.55% (dependent on your credit score), and maintenance costs may also increase with older vehicles. Instead, pay those suckers off! It really is wise to pay off any auto loans before retiring so that you have one less monthly bill to worry about.

Or, at least consider selling one of your extra vehicles. You may even want to opt for a more economical car to reduce this financial burden.

4. Medical debt

While Medicare and supplemental insurance help considerably with healthcare costs (thank you, FDR!), unexpected medical expenses can still arise, especially in retirement. Check it out: It is estimated that a senior will need $165,000 to cover healthcare costs in retirement.

One thing to know about medical debt is that it is typically negotiable. This means you can call up the provider and inquire about settling the bill for less than the stated invoice amount. Play the senior citizen card. It works.

So here’s the bottom line: Eliminating and/or reducing debt before retirement is essential for a more secure, stress-free retirement. By tackling these debts head on, you will set the stage for a financially stable (not to mention much easier) and more fulfilling retirement.

Alert: highest cash back card we’ve seen now has 0% intro APR into 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.