How to Retire With Debt and Almost No Savings

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Early retirement seems to be an impossible dream for most Americans. Traditional approaches to retirement planning will suggest having adequate savings and retirement income before retirement. Of course this makes a lot of sense, but it will be difficult to do if you are already middle aged and don’t have a lot of discretionary income.

Another approach is to develop a strategy to eliminate debt and begin savings after you retire. This is not easy to do since most people will experience a significant decrease in income following retirement. This is contrary to traditional advice, so can it really be done?

This is possible by having an adequate amount of discretionary income to regularly pay down your debts. The strategy is simple: increase discretionary income, pay off your debt and then begin your savings plan. But how would that be possible without resorting to a diet of water and crackers?

A strategy that more and more people are beginning to explore is to retire outside of the United States. It’s quite possible to keep up your standard of living at a lower cost in many countries around the world. As an example, you could easily maintain a comfortable lifestyle on $700 a month in Thailand.

A typical retiree will have an income of about $1,700 a month with monthly living expenses in that same range.It is possible to pay off debt and then build savings by living overseas where your living costs have been reduced. So, how would your financial situation change if your income was the typical amount of a modest $1,700 per month? Overnight, you could suddenly have a discretionary income of $1,000 a month if you could reduce your living expenses to $700.

With a little discipline, even the average American on social security, may find it possible to eliminate debt and begin some kind of savings or investment plan by living abroad. Unfortunately, this usually means that you will have to postpone retirement and continue to work until your debt is gone and savings is built. Or you could hope and pray that Ed McMahon shows up on your doorsteps with a million dollars. Both of these alternatives are difficult if not impossible to achieve for most Americans.

A typical retiree could retire his debt and start building savings by moving overseas to a developing country where the cost of living is lower.This is contrary to what most financial counselors would recommend. This is sound and traditional advice, but it is not a practical approach if you are living on a very tight budget and carrying a lot of debt.

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