Explained: What Is ‘EMI Retirement’? How Debt Is Following People Into Their Golden Years
For many people, retirement is usually accompanied by pending loans, which could be a cause of financial crisis due to declining income.
Retirement planning is often aimed at a relaxing and carefree life with financial stability. But for some, the situation is not the same. They continue clearing EMIs (equated monthly instalments) deep into their golden years. This makes what could be a worry-free period into a major concern.
With shrinking income and rising costs, it could be difficult for many retired persons to pay their EMIs every month. This is referred to as ‘EMI Retirement’, which could push many people into financial distress in their golden years.
An equated monthly instalment, or EMI, is an easy method of repaying a loan. You pay a fixed sum every month that includes the loan's interest and principal amount. This ensures the loan is cleared at the end of its term. EMIs are common modes for paying off personal loans, home loans, automobile loans, or education loans.
Monthly instalments simplify the management of debt. However, in the retirement years, it could be a concern.
What Is EMI Retirement?
EMI Retirement is a condition in which people enter retirement with outstanding debts. Rather than basking in the peace of mind and freedom associated with being debt-free after retirement, these retirees are still burdened with monthly EMI repayments. Month by month, a portion of their pension or retirement fund goes to repay these loans. This burden can transform what ought to be a peaceful and satisfying aspect of life into one of consistent financial pressure.
Factors That Lead To EMI Retirement
Increasing costs of education, housing and health care result in debts accumulating faster than anticipated. Apart from this, life aspirations, such as availing loans for home improvement, cars, or vacations, contribute to the burden. In some cases, many people may not have saved and planned enough for retirement. Such individuals are left with outstanding debts even after their retirement.
How To Avoid EMI Retirement?
Here are a few simple ways to avoid extending debt into your retirement years:
Plan early: Save normally for retirement and aim to pay off significant debts.
Create an emergency fund: This prevents you from taking new loans in retirement.
Review post-retirement spending: Consider outstanding EMIs before computing your planned retirement corpus.
Consider downsizing or loan consolidation: Debt consolidation or downsizing expenses may release cash flow at the time of retirement.
EMI Retirement could be stressful, but being aware of the problem and taking adequate measures at an early stage can make your retirement debt-free. A careful plan is the starting point towards financial freedom in your retirement years.
