Too many seniors are facing that grim scenario. According to the Employee Benefit Research Institute (EBRI), the share of families age 75 and above with debt shot up from 31.2 percent in 2007 to almost half in 2016. The average debt of these households is $36,757.
The pre-retirement crowd isn’t faring any better. According to EBRI, 77 percent of families with heads of household aged 55-64 are carrying debt.
Increasing Fastest Among Oldest
However, the percentage of debtors is increasing most rapidly among seniors aged 75 and above.
Where’s the debt coming from? Traditional sources like mortgages and credit card debt are increasing among seniors.
Approximately 42% of families aged 65-74 and 26% of families aged 75 or above had credit card debt as of 2016 – the highest percentages ever in the EBRI data from 1992 to 2016.
Student Loans Among Elderly
Surprisingly, student loan debt has increased rapidly among seniors. According to the Consumer Financial Protection Bureau (CFPB), the number of student loan debtors age 60 and above quadrupled from 2005 to 2015 and the average outstanding balance almost doubled to $23,500.
What can you do to reduce your debt? There’s no easy answer, but it all starts with your budget. The only way to pay down debt is to have a monthly surplus to apply to that debt.
Review your spending and expenses with retirement in mind. AARP offers a worksheet that helps seniors evaluate their budget and look for ways to save. Medicare also offers similar guidance for health care and drug costs. Medicare however, will not pay for all expenses. For example in New York you’ll need a medigap plan to cover the 20% of costs that Medicare doesn’t cover.
Look for Income
Consider income opportunities as well. Do you have skills or hobbies that can be turned into income? Do you have unused assets to sell?
In addition, check with the Social Security Administration to make sure your benefits are correctly calculated. An error in your work record could significantly decrease your benefits.
Once you have a surplus, attack high interest rate debt first (typically credit card debt). Try to limit your credit card debt to auto-payments that cover your basic needs – keeping the credit card debt from growing.
Consider taking advantage of a balance transfer card that offers 0% interest for an introductory period.
You can pay down debt without incurring new interest charges – but this strategy only works if you have credit card spending under control.
Otherwise, after the introductory period you’ll still have debt – and likely a higher interest rate.
If student loan debt is a primary burden, investigate your options for alternative payment programs through the Department of Education.
Income-based repayment options and other programs may allow you to at least reduce your monthly payment and attack other higher-interest debts.
Consider refinancing options or downsizing to deal with excessive mortgage debt – but seek professional help to make sure your refinancing or downsizing costs don’t end up exceeding the savings that you realize.
Re-Evaluate Your Goals
Finally, re-evaluate your retirement goals, taking debt into account. If you need to scale back your plans, do it early. As you evaluate new options, you may find alternatives that are better as well as less expensive.
Take steps to reduce debt as much as possible before reaching your retirement years, while you have more options – but if you’ve already reached retirement, don’t fret about things you should have done years ago.
Use the above tips as best you can and enjoy your retirement years. You made it through other hard times just to get to retirement, and you’ll make it through your retirement years as well.
This article was provided by our partners at moneytips.com. Photo ©iStockphoto.com/Wavebreakmedia
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