For many people, the goal at the end of their career is to retire completely debt-free. This means no more monthly loan payments, no interest charges and no worrying about late fees or the impact those balances might have on your credit score. Essentially, no more costs that will eat into your retirement savings.
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Paying off debt is often easier said than done. But the good news is you don’t have to wait until retirement to become debt-free. In fact, there are certain debts you should try to pay off well beforehand. Think of it as debt repayment triage. Doing so can alleviate financial stress and free up some extra cash in your retirement accounts.
GOBankingRates spoke with Allan McNabb, an individual from the baby boomer generation, about the debts he believes people should pay off before retiring and why. As you embark on your debt repayment journey, you should check out what he has to say.
Former retiree and current vice president of Image Building Media, Allan McNabb recommended soon-to-be retirees aim to finish paying off their home if possible.
“I think it’s critical to pay off your mortgage before retirement,” continued McNabb. “I’ve always believed in the peace of mind that comes with owning your home outright.”
He even remembers the day he made his final mortgage payment in 2023. “It was such a liberating experience,” said McNabb. “It’s like a weight was lifted off my shoulders, knowing that I now own my home and wouldn’t have to worry about those payments during retirement.”
Many other financial experts also suggest getting rid of that mortgage payment before retiring. In Dave Ramsey’s 7 Baby Steps money management plan, step six entails paying off your mortgage early. His advice is to pay off all other debts — including the car and student loans — first to save on interest and secondly to become debt-free (aside from the mortgage).
“Debt will destroy your plans to retire early,” Ramsey wrote. “It will eat up your monthly income and drain your retirement savings.”
As of July 2025, the average mortgage rate on a 30-year, fixed-rate loan was 6.67%. The average home sales price in the U.S. is $522,200 (for May 2025). Here’s an example of what your monthly and total payment could look like on such a home (excluding things like taxes, insurance and HOA fees):
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You put forth a 20% down payment of $104,000, leaving you with a $416,000 loan.
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Your monthly payment amount would be roughly $2,710 (principal and interest).
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The total principal amount over 30 years would be $416,000, while the total interest paid would be $557,332. That’s $973,332 (including interest).
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Now, say you cut that down to 15 years. That’s $416,000 toward the principal and $247,451 toward interest. Your total charges would be $663,451 (including interest).
Even if you can’t pay off your loan early, freeing up that $2,710 a month can ease you into your desired retirement lifestyle — and help your retirement funds stretch much further.
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Auto loans are another of those debts that can come with a high interest rate. According to Experian, the average annual percentage rate (this is the interest rate plus other lender fees) on a new car was 6.58% as of last year. The average rate on a used vehicle was 11.17% during that same time.
If you’re still dealing with a car loan, definitely prioritize paying that off. You could end up saving thousands in interest.
As McNabb explained, “I found it really beneficial to go into retirement without owing anything on my vehicles. It’s nice not having to worry about car payments when your income is fixed.”
Here’s an example of what a car loan might cost if you carry it into retirement:
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You put 20% down ($4,000) on a $20,000 vehicle and finance the rest in a five-year loan with a 7% APR.
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Your monthly payment would be about $317.
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By the end of the term, you’d have paid $16,000 for the vehicle itself and an estimated $3,009 in interest charges.
Even if the interest itself isn’t your main concern, that $317 a month could have been put toward other, more important things in retirement. Plus, it’s hard to put a price on peace of mind.
Last but not least, McNabb suggested paying off any credit cards before retirement. According to the Consumer Financial Protection Bureau (CFPB), the average credit card interest rate is 22.8%. That’s nearly double what it was a decade ago.
It’s no secret that credit cards can be a financial burden, but when you’re retired and living on a fixed income, they can be seriously stressful.
“I’ve seen how high interest rates can eat into your savings,” said McNabb. “I made it a point to pay off my credit card debt as quickly as possible. Even before my retirement. I prioritized it because I didn’t want those interest payments to reduce the funds I’d saved for my golden years.”
Dealing with debt can be stressful, but there are ways to alleviate the burden — and pay it off well before retirement. Here are just a few:
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Cut back on expenses and put more money toward your existing debts.
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Follow the debt snowball method to pay off your debts in order of the smallest to the largest balance (regardless of interest).
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Use the debt avalanche method to pay off your debts based on interest rate (highest to lowest).
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Increase your income and put those extra earnings to work paying off your debts.
If you’ve already retired, or if you’re approaching retirement, it’s never too late to pay down your debts. The key is to prioritize what you owe based on what is causing you the most stress — financial, emotional or otherwise — and be as disciplined as possible as you go.
Depending on your income situation, you may also be able to find local or community resources to help you out. Check with your state government or nonprofit organizations to see what’s available.
Caitlyn Moorhead contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: I’m a Retired Boomer: 3 Debts You Should Prioritize Paying Off Before Retirement
