You might dream of traveling, playing golf, or spending time with the grandchildren when you retire. You’re probably not dreaming about paying on your debt. Ideally, none of us would worried about debt in our later years. The reality is that half of us will have debt in our retirement years. What are the options for dealing with it?
Options for dealing with debt in retirement:
1. Ensure that you’re aware of all the benefits you should be receiving.
There are benefits available to help with utilities, food, healthcare, and other items. Check with the National Council of Aging to explore all the options available to you.
- Avoid being bashful. You worked all of your life and deserve these services. Every little bit helps and leaves more money for debt payments.
2. Consider cutting back.
Like anyone else with more bills than income, it might be time to downsize your lifestyle. A smaller, less expensive house can free up a lot of money each month. Ensure your entertainment dollars aren’t wasted. Create a Make every Dollar Count Budget.
3. Consider your retirement expenses before retiring.
Consider the lifestyle you’d like to live and calculate your expenses. Most retirees are surprised by how much retirement costs. They fail to account for the cost of enjoying the time they previously spent working.
- You probably don’t want to sit at home all day. Going to the movies, going out for lunch, travel, golf, and shopping all cost money.
- Project your expenses and determine how much money you’ll have left over each month for your debt.
4. Work for a few more years.
There are always options if you need to continue working. A few extra years can make a huge difference. Your current investments have more time to grow. You can also avoid dipping into your savings.
5. Refinance your home.
If you have a lot of equity in your home, consider pulling it out with a refinance. You can invest that equity and use it for paying your debt or living expenses. Be wary of adjustable interest rates. Predictability may be more important for your situation. Do not borrow more than 80% Loan to Value, as this triggers Mortgage Insurance. We are at all-time low interest rates ever in history.
6. Pay your mortgage more quickly.
If you’re still working, make extra payments on your home to eliminate the mortgage as soon as possible. Imagine how nice it would be to retire without a mortgage payment.
7. Consider a reverse mortgage.
There are many rules and regulations regarding this type of mortgage. However, you can live in your home and don’t have to make payments as long as you live in the home. You will still be responsible for the taxes, insurance and upkeep of the property. It’s important to educate yourself before considering a reverse mortgage. Consult with an expert.
8. Consult with professionals.
If you have excessive debt and minimal income, a financial expert can be of great assistance.
9. Consider bankruptcy.
Whether this is a viable option will depend on your state of residence and your financial situation. For example, some states will permit you to keep up to $1 million of equity in your home. Others only permit a few thousand dollars. Bankruptcy is not the best option, but sometimes it is unavoidable.
- If you have excessive consumer debt and minimal assets, bankruptcy might be an option. Consult with a knowledgeable bankruptcy attorney before taking action.
No one likes to think about dealing with debt in their later years. However, statistics show that roughly 50% of retirees have considerable debt. Get started today and prepare for the future. If you’re already retired, consider getting an expert opinion regarding your debt. There is often a solution you never considered.