Retirement Retirement Planning

Warren Buffett Has One Rule for Retirees on a Fixed Income - And It's Not Negotiable

Following it could create some breathing room in retirement.

By Catherine Collins , Edited by Laura Hohenstein

Updated Oct. 9, 2026

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Warren Buffett is known for being one of the wealthiest people in the world. Because of that, he often gives financial advice through the press and media. Although he stepped down as CEO of Berkshire Hathaway in January at 95 years old, several pieces of his advice still stand the test of time.

One rule he has is to stay out of high-interest debt. This rule is especially beneficial for retirees, who often live on a fixed income from their retirement plan withdrawals and Social Security. Avoiding credit card debt can make it easier to pay expenses and maintain a healthy cash flow in retirement.

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Buffett says paying off high-interest debt gives the best return

One of the main reasons Buffett encourages people to pay off high-interest debt is because it's a guaranteed rate of return. Plus, because credit card interest rates are so high, Buffett says paying it off is also one of the best returns you can get on your money. He went on to explain that having credit card debt can prevent you from making financial progress.

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Buffett suggests paying off high-interest debt before investing

Even though Buffett is an incredibly successful investor, he recommends paying off high-interest debt before investing. He says that if you have any cash available, he would pay off high-interest debt before investing in anything. He said at a Berkshire Hathaway event in 2020 that, "You can't go through life borrowing money at those rates and be better off."

The Federal Reserve reports on average credit card interest rates

The Federal Reserve Bank of St. Louis regularly reports average interest rates on credit card debt. As of May 2026, the average credit card interest rate is 20.94%. That's why Warren Buffett says that paying off credit card debt is the best investment idea he has. After all, very few investments will return 20%, and as Buffett mentioned, paying off your cards is a guaranteed way to get that rate of return. Plus, becoming debt-free gives you the feeling of an immediate financial win, reducing stress and allowing you to improve your cash reserves.

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Many retirees still have debt, including credit card debt

According to the most recent data from the Federal Reserve's Survey of Consumer Finances, 57% of retirees have debt. Another survey from LendingTree found that 93% of seniors carry a credit card balance. It can be challenging to balance high-interest debt with other financial responsibilities in retirement. Minimum payments on credit cards may not help bring the balance down, which means the debt can compound and create financial stress in retirement.

Buffett is in favor of spending less than you earn

Being credit card debt-free fits in with Buffett's larger philosophy of spending less than you earn. It sounds like simple advice, but because people have such easy access to credit, it can be challenging to follow. In addition to spending less than you earn, Buffett doesn't recommend chasing status or power. He modeled this himself by living in the same home for over 60 years and driving a Cadillac when he could afford any car.

Buffett doesn't think all debt is bad

At a recent Berkshire Hathaway meeting, Buffett clarified that he doesn't think all debt is bad. He says that he makes an exception when it comes to having a mortgage on your house. However, high-interest debt, like credit card debt, can make it difficult to ever get out of it. Retirees still may want to consider being mortgage-free in their later years, because it can free up cash flow that can be used for other things, like healthcare expenses as you age.

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Having an emergency fund can insulate you from going into high-interest debt

Whether you're debt-free or still have credit card debt to pay off, it's important to have an emergency fund. Even a smaller $1,000 emergency fund can give retirees some financial breathing room.

Buffett is known for having large cash reserves in Berkshire Hathaway, which allows him the ability to take advantage of new business opportunities as they arise. In retirement, having an emergency fund equal to several months of expenses can help you stay out of credit card debt when unexpected expenses pop up. It also means you won't have to withdraw from your retirement accounts in a down market just to cover an emergency.

Bottom line

Buffett believes having credit card debt at any stage in life is a financial mistake. However, he says paying it off is one of the best returns on investments you can get. Keeping a solid emergency fund and avoiding high-interest debt in retirement can help you avoid feeling stressed about money during your golden years.

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