Which of the following best explains how debt can prevent someone from enjoying financial freedom after retirement?

• A. Debt requires ongoing payments, reducing disposable income and limiting lifestyle choices during retirement.
• B. Debt automatically disappears upon retirement, so it has no impact on post-retirement life.
• C. Debt allows retirees to spend more freely without concern for future financial obligations.
• D. Debt increases the amount of government benefits received after retirement.

Answer: (A)

Verified step by step guidance

1. Understand the concept of financial freedom in retirement, which generally means having enough income and resources to cover living expenses without financial stress.
2. Recognize that debt involves obligations to make regular payments, such as loan repayments or credit card bills, which continue regardless of employment status.
3. Analyze how ongoing debt payments reduce the amount of disposable income available to retirees, thereby limiting their ability to spend freely or maintain their desired lifestyle.
4. Evaluate the incorrect options by considering that debt does not automatically disappear upon retirement, nor does it increase government benefits or allow unrestricted spending.
5. Conclude that the best explanation is that debt requires ongoing payments, which reduce disposable income and limit lifestyle choices during retirement.