Get rid of debt before retirement

I'M A big fan of entering retirement with as little debt as possible, but surprising numbers of Australians are still carrying large sums of debt even when they're close to, or in, retirement.

An AMP/NATSEM report from late 2015 found 78% of 50 to 65-year-olds still had household debt, and 44% of over-65s faced a debt burden. And we're not talking nickel and dime sums either.

The average debt among 50-65s is $68,500 but at the top end of the scale, one in 10 of these households owes $534,300.

To put these figures in perspective, super industry body ASFA says men retire with an average of $292,500 in super, a figure that falls to $138,150 for women.

With this level of super savings, ASFA notes the majority of recent retirees will need to substantially rely on the age pension.

Using your super to pay out personal debt - especially big-ticket debt like a home loan, means losing a solid chunk of your nest egg in one hit, further increasing the likelihood of having to turn to the pension for income support.

One alternative is to remain in the workforce for longer. Sure, this is a chance to grow your super and pay down debt, but there are no guarantees about when you will retire. Workers often find themselves entering retirement earlier than expected due to health concerns or the need to care for an aging family member.

I realise we're also continually being reminded of the need to add to our super. If you're unsure which way to go - pay off your home loan or contribute to super - take a look at the "Super versus Mortgage" calculator on the government's Money Smart website. It can provide an idea of which option will leave you better off depending on your life stage.

As a general rule though, making a concerted effort to enter retirement debt-free provides plenty of pluses. It means living a relaxing, uncomplicated life free from stress about debt.

If you think about all those potential repayments that could be accumulating in your own pocket instead of being funnelled off to the bank, you get a better mental picture of the benefits of enjoying a debt-free retirement.