Don’t Let Debt Get in the Way of Retirement

For more Americans, loans are getting in the way of retirement savings.

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Paying off debt is hard enough when you’re in the working world, making a steady paycheck every couple weeks. But once you near retirement, managing credit cards, auto loans, or a mortgage can be almost impossible – in fact, carrying that kind of debt could prevent you from retiring at all.

A recent survey by the online brokerage firm Scottrade found that most Americans – 63 percent -- say debt is preventing them from saving for retirement. Almost 4 in 10 respondents said they were concerned that they have too much debt. Craig Hogan, director of customer intelligence for Scottrade, says that indebtedness will probably cause many Americans to work longer, retire later, or permanently delay retirement.

[Slideshow: 21 Ways to Reduce Your Retirement Expenses]

The Scottrade survey comes on the heels of a study from MetLife that suggests many people are waiting too long to make retirement-related financial decisions. In fact, it found that many people waited until their 60s to understand their corporate and government retirement benefits. Men scored better than women: They were more likely to have considered whether they can afford to retire and to figure out how to receive their benefits. Over half of respondents reported that they were behind on their savings goals and one in four people were significantly behind.

Together, these surveys suggest that most of us have a long way to go before feeling financially prepared to retire. So, how can we rectify that situation? The first step is to give ourselves a reality check – by figuring out how much money we have saved and how much more we need to save. To make the number-crunching easy, pick a retirement calculator. Some good ones include TD Ameritrade's WealthRuler,'s retirement calculator, Transamerica’s worksheet. (See How to Pick a Good Retirement Calculator)

Here are some additional tips:

Save more, not less. Most financial advisers say taking money out of the market when shares are down or you really need the cash is the wrong move, because you miss out on any future gains and compounding in the meantime. Plus, you might have to pay a penalty for early withdrawals.

Change your budget. Diane Young of TD Ameritrade says the biggest mistake people make is underestimating how much they can put away for later. "They're thinking they can't save more than they're already saving. But you can. You don't have to go out to dinner four times a week or spend $5 on coffee," she says. Even saving such a small amount pays off in the long run, she says.

Follow tried-and-true strategies. Diversify your investments through index or mutual funds, and decrease your exposure to stocks by shifting into safer vehicles such as bonds and cash as you approach retirement. A new survey from Vanguard found that investors are increasingly looking to low-fee funds, which keeps more money in their accounts.

[See Parents Struggle with Retirement Savings]

Then forget about it. There’s no good reason to follow every dip in the market. Instead, focus on a hobby, get some fresh air, and spend time with friends.

TD Ameritrade also offers these five suggestions:

1. Set goals and outline a budget that helps you meet them.

2. Contribute to your employer-sponsored retirement plan.

3. Set up your bank account to automatically save a certain amount each month.

4. Join up with others also interested in saving more to share common challenges and questions.

5. Make use of online tools, including TD Ameritrade’s Wealth Ruler.