How to pay off debt in retirement

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Should you worry about your debts in retirement? The short answer is yes.

If possible, it is best to avoid going into debt in retirement. Studies have linked credit card debt to increased stress and even physical pain. Meanwhile, seniors who don’t have such burdens find it much easier to manage their finances and make ends meet.

According to the Federal Reserve Bank of New York, from 1999 to 2019, the debt of Americans over the age of 70 soared by 543%. A 2021 report from Experian found that the average credit card debt held by baby boomers was $6,230, while the average credit card debt held by the silent generation (now aged 76 and plus) was $3,821.

Households of seniors aged 70 and over are more likely than before to have credit card debt, mortgages and even student loans.

Embrace frugality

To make debt payments more manageable, create a budget. List all your essential and non-essential expenses, and don’t forget to include your debt payments in the essential category. Compare this list to your monthly income. If you don’t bring enough to cover your needs, reduce. You know what to do: reduce your television subscriptions, borrow books and DVDs from the library, cook at home, etc. Automate your bill payments so you don’t forget and incur late fees.

It can be useful to track your expenses, to see where your money is really going. If you account for every penny, it will be easier for you to see where to cut the fat in your spending. You can use an app, a spreadsheet, or a simple ledger. If credit card debt is a problem, shop with cash instead. You don’t want to find yourself stuck paying high interest rates that get worse when you can’t pay off your balance each month. And avoid shopping altogether when possible: Buy Nothing communities on Facebook can be a great way to get what you need at no cost.

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Rethink your living situation

Housing is one of the biggest items in most budgets, so one way to reduce your expenses is to lower your housing costs. This could mean downsizing within your same community or moving to an area with a lower cost of living. Check out Money’s Best Places to Retire for a roundup of attractive and affordable locations. Walkable communities can provide opportunities for exercise and abandon a car. Transportation is another big budget item, so to the extent that you can get rid of gas, insurance, and car payments for one of your vehicles, that will free up some cash to spend on your debt.

If you prefer to stay put, government and other local programs can help eligible seniors pay property taxes or complete home repairs. Taking on a roommate can also help you stay in your place. Some cities have programs that screen and match potential roommates, like this one in New York.

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Seek professional help

White do-it-yourself solutions may work for some, there is no shame in seeking professional help to get out of debt. Many credit counseling networks offer free credit and budgeting services, but creating a debt management plan (DMP), an option to aggressively repay creditors at a lower interest rate, usually costs money. It is important to go with a reputable consulting agency. Here are three well-considered options.

About the Author: Lyle D. Solomon is a senior attorney with Oak View Law Group in California, where he specializes in consumer credit. He has also written several articles on financial wellness. Connect with him on LinkedIn or tweet him at @lyle_solomon.

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