Five Steps to Avoid Debt During Retirement

DebtIt used to be that retirement meant lazy days, no stress and sufficient money to handle basic living expenses.

However, thanks to the financial crises that destroyed investment accounts and the housing market, more retirees are in debt than every before.

In fact, 44% of senior citizens carry some kind of debt, whether from a mortgage, credit cards or something else.

The average amount of debt that Americans over the age of 65 carry is roughly $26,000, according to the Business Insider.

This figure is double what it was ten years ago, and it doesn’t seem to be slowing down.

What is the Cause of the Debt?

People used to have their mortgages paid off before they retired, leaving them extra income to cover the unexpected expenses that life brings. When the housing market crashed, many people turned to reverse mortgages to cover everyday expenses. On top of that, credit cards were not getting paid off every month, and the debt pile just continued to grow.

The average credit card debt of people over 65 years old is $9,300, which is more than any other age group, Kiplinger points out. With all of this debt, senior citizens may think that it is impossible for them to get a car. However, retirees who are deep in debt and in need of a car are able to use auto loans from to secure a vehicle.

What Can Be Done?

Unfortunately, the past cannot be undone. However, the way that things are now is not the way they have to remain. Five strategies are available for pre-retirees so that debt doesn’t continue to haunt you when you’re supposed to be living the good life.

1. Downsize Early

Many people plan on downsizing to a smaller home once they hit the retirement age so they can manage their limited income easier. However, Forbes suggests that people downsize as soon as they can—the sooner the better.

2. Time Mortgage Payoff Accordingly

Instead of having to make a mortgage payment after retirement, there is another option. Middle-aged people should figure out how much extra money they need to tack onto their existing mortgage payment to ensure it is paid off before the age they plan to retire. Once the huge expense of a mortgage is depleted, managing other debts and expenses during retirement will be much easier.

3. Get a Second Job

When people are still young enough to work, they should. The second job can be anything to bring in extra money, including selling homemade crafts or picking up an extra shift here and there. The money earned should go directly to paying off debt. Once debt is paid off, it can be added to the retirement fund.

4. Reduce Retirement Contributions Temporarily

If the amount of debt accrued seems impossible to tackle alone, it may be wise for people to reduce how much money is put into their retirement account until this debt is paid off. However, it is very important to return the contributions to the original amount upon completion.

5. Work a Little Longer

When all else fails, people may want to extend their working years a little bit. Not only will the extra money earned help pay off debt, more income means more money is put into the retirement account.

The debt problem among senior citizens today is something for all people to be aware of. If workers are proactive, they will be able to have a debt-free, enjoyable retirement—the way it was meant to be.

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