5 Tips to Help Seniors Manage Debt During Retirement

Managing debt is no easy feat, and it can especially be scary during your retirement years. And unfortunately, it’s something that many seniors deal with; according to Forbes, 30% of seniors over 65 were still paying a mortgage in 2019, millions still had student loans, and over had still carried some kind of debt. If you find yourself struggling with debt during later years, you’re not alone. 

Debt doesn’t just take a toll on your financial well-being, but can also take a toll on your emotional well-being. When money impacts your livelihood, it also creates stress and can continue to spiral into depression and other bodily health complications. Rather than wait so long that you exhaust your resources, it’s better to address your debt head-on so that you can live out the rest of your retirement years happily and healthily. Here’s what you need to know about managing your debt during retirement: 

Get Credit Counseling

If over 20% of your income ends up going towards your debt, you may want to speak to a credit counselor. Credit counseling is a strong option if you feel as though your debt is unmanageable or if you aren’t educated on credit card policies. Credit card terms can be tricky and complex, and knowing what to do next to make your situation easier is rarely a walk in the park. Credit counselors advise consumers on debt and money management, assist with debt repayment plans, help them create workable budgets, and will negotiate with creditors on your behalf. 

Capitalize on Your Home’s Equity

Refinancing your mortgage or taking out a reverse mortgage could be a strong option to lower the number of future payments and interest rates. If your mortgage balance is less than half of your home’s market value, you can tap into your home equity without having to pay it back until you sell the house, move, or pass away. To if and how you qualify, check out this reverse mortgage calculator from All Reverse Mortgage.

Sell Certain Assets

Now is a good time to take stock of your inventory and consider how you can bring in some extra money. Start by analyzing how much you owe, how much you’re paying on a monthly basis, how much money you’re bringing in per month, and how much you’re spending per month. Then take inventory of all your assets. For example, if you have another vehicle, artwork, vacation property, or pricey electronics that you don’t use often, start to downsize these extra assets that you aren’t using very often. This can give you some much-need funds to help you pay down your debt. 

Consider Filing for Bankruptcy

By nature, bankruptcy can feel like a cruel word. But there may be instances when it might be your best option, and there’s nothing wrong with that. If you’re in a situation where you’re forced to use all of your pension or retirement funds to pay off your debt, bankruptcy may be the better choice. However, some misconceptions about bankruptcy can ward seniors off. For example, it’s possible to file for bankruptcy while still retirement funds and a significant portion of savings. For seniors who don’t expect to incur new loans or credit, the hassle associated with bankruptcy is minimal. 

Consolidate Your Debt

If you’re carrying too much debt, whether it’s credit card debt or student loan debt, debt consolidation might be a viable choice for you. In many cases, you may be able to benefit from a lower interest on your consolidated debt or negotiate a lower debt payoff. Seniors with a great credit score may be able to transfer the entire balance of a particular card to a new card with a 0% introductory rate for several months, which helps individuals bring down their debt interest-free. 

However, it’s important to consider the potential disadvantages of debt consolidation. For example, if the terms of your new loan are unfavorable, while it could offer short term benefits, you might end up paying even more in interest over the lifetime of the loan. Before signing the dotted line on any debt consolidation agreement, talk to a financial professional to help you better understand the terms.

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