Pay Off Debt While Saving for Retirement: Smart Strategies

How to pay off your mortgage and other debt while planning for retirement

Thanks for your question, Denise. Many households earn decent incomes and hold valuable assets like homes, yet still struggle to get ahead because spending outpaces savings. With inflation and higher mortgage rates, this pressure is even more common. The good news is you still have time to make meaningful changes before retirement; the harder news is that a repeatedly maxed line of credit typically indicates living beyond means and needs to be addressed.

Below are practical strategies to reduce debt, protect your savings, and improve your chances of retiring comfortably at 65. These ideas focus on improving cash flow, lowering interest costs, and prioritizing retirement contributions.

6 strategies for managing debt before you retire

Use these six approaches to regain control of household finances so you can pay down debt and build retirement savings.

1. Build a realistic budget

Create a comprehensive monthly household budget that records all income, fixed expenses, variable spending and savings. Review bank and credit card statements from the last six months to identify patterns. A clear budget shows your monthly surplus or shortfall and highlights where cuts or reallocations are possible.

2. Cut expenses intelligently

Work with your spouse to reduce discretionary spending and eliminate wasted charges. Review credit card statements for recurring subscriptions, streaming services, or memberships you no longer use and cancel them. Focus first on large expenses that will make a material difference—selling a second car, refinancing a high-cost service, or delaying a major purchase. Also shop insurance, phone, internet and utility plans to lower ongoing costs.

Set aside estimates for one-time “budget breakers” (car repairs, dental bills, home maintenance) so these don’t derail your monthly plan.

3. Build an emergency fund

An emergency fund prevents you from tapping retirement accounts or lines of credit when unexpected costs arise. Aim to save three to six months of living expenses in an accessible account. Even a modest, regular contribution will reduce vulnerability to job loss, sudden repairs, or other shocks.

4. Prioritize debt repayments

List every debt with its balance, interest rate, minimum payment and remaining term. Decide together which debts to tackle first. Two common strategies are the avalanche method—paying high-interest debts (like credit cards) first to minimize interest paid—and the snowball method—paying smaller balances first to build momentum. Use a debt calculator to model repayment timelines and monthly requirements. As balances fall, redirect freed-up cash toward retirement savings.

5. Consider consolidating high-interest debt

Managing multiple high-interest debts is costly and complicated. Consolidation into a lower-rate loan or a structured payment plan can reduce interest costs and simplify payments. This could be especially helpful for your husband’s recurring line-of-credit use. Consolidation won’t apply to mortgages, but combining unsecured debts can free cash flow that can instead be invested in retirement accounts.

6. Evaluate selling the secondary property

Owning two houses adds maintenance, insurance, taxes and management time. Selling your husband’s rental could eliminate his mortgage and line of credit, and any surplus could boost retirement savings. Before moving forward, he should calculate potential capital gains and tax implications since rental income and sale proceeds may affect his tax bracket. Financially, selling can simplify your lives and improve cash flow; emotionally and practically, it’s a major decision that deserves careful consideration.

How much money will you need to retire?

You and your husband are about 15 to 18 years from age 65, which is enough time to make meaningful progress if you act now. Use a retirement cash-flow calculator to estimate how much you’ll need in retirement, including expected income sources like the Canada Pension Plan and Old Age Security. Since your husband has a company pension, he should consider whether contributing more to a TFSA rather than an RRSP is a better fit given his pension income and tax situation. Booking a few sessions with a fee-only financial planner can clarify the optimal approach for both of you.

Take advantage of employer matching

If either of you have employer matching for RRSPs, TFSAs, defined benefit or defined contribution plans, or other matching programs, make sure you’re enrolled and contributing enough to capture the full employer match—this is effectively free money and a fast way to increase retirement savings.

When to get professional help

When budgets are tight and multiple priorities compete, professional advice can be valuable. A certified credit counsellor can help with budgeting, repayment strategies and debt consolidation options. A fee-only financial planner can create a coordinated plan that balances debt repayment with retirement savings, tax planning and estate considerations.

Denise, with focused budgeting, disciplined debt repayment, an emergency fund and the right professional guidance, you and your husband can improve cash flow, reduce interest costs and rebuild retirement savings in time to meet your retirement goals.

Read more on debt:

• How to create a monthly budget: A step-by-step guide for Canadians
• Debt demystified: How to calculate your debt
• What happens to your mortgage after a divorce?
• How to consolidate debt in Canada