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Getting Rid of Debt Before or During Retirement

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Eliminate Debt Before Retirement

Getting Out of Debt to Save Your Retirement Plans.

In today’s economy, it’s no surprise that only one in seven Americans are confident in their ability to retire comfortably. Everyone would like to eliminate debt before retirement though fewer are in that position.

Here’s why: Once upon a time, retirement meant a comfortable, debt-free life of leisure. Nowadays, more and more seniors are racking up crippling credit card debt and find themselves upside down in their homes, often with second mortgages. The credit card debt may be a result of unforeseeable medical expenses.

But equally common are the amount of seniors who have turned to credit cards to supplement their limited, fixed income. What’s worse is that today’s retirees have on average far more in pension and benefits than the aging Baby Boomers. Indeed, aside from credit card debt, a large percentage of persons aged 50 to 65 are still paying a mortgage and still many more have experienced a job loss or pay cuts in the last few years.

A Closer Look at What’s Putting Retirees in Debt

Unexpected Medical Bills

According to recent surveys by the Millionaire Corner, unexpected medical expenses remain the leading single cause of debt for retirees. Compounding this problem is the fact that health care costs in the past several years have risen faster than the overall inflation rate. And while Medicare changes resulting from the Affordable Healthcare Act are expected to reduce out-of-pocket expenses for prescription drugs for many seniors, this may not be enough to counter the rising costs of other health care services.

An Underwater Mortgage

The University of Michigan Health and Retirement Study reports that 61 percent of homeowners ages 57 to 62 have not paid off their mortgages. If your home is currently underwater (you owe more on your mortgage than your home is worth), selling your home won’t make you any money and you won’t be able to refinance because your equity is gone. Because of this, many people find themselves stuck in a house that may be too difficult for them to manage, much less pay off, as they age.

Job Loss/Pay Cut

As you age, remaining healthy enough to keep your job is a serious concern for many people. At some point, you’ll reach an age where working is no longer a feasible option. If, on the other hand, you’re ready and willing to work, you may consider part-time freelance positions, which allow you to complete work remotely.

Either way, it’s never too early to practice living on a fixed income. Sites such as Mint.com and financial software such as Quicken are great ways to track your expenses from week to week and create and manage a budget. The truth is, while your income will undoubtedly decrease in retirement, your expenses won’t decrease as much as you think. Sure, you’ll save on commuting, clothes, and maybe house payments, if you’re lucky. But factor in the increase costs of traveling, eating out, not to mention medical expenses, and you’re about even.

Credit Card Spending

Almost 50 percent of households headed by someone between 55 and 64, and 37 percent between 65 and 74, carry credit card debt, according to the Federal Reserve’s most recent Survey of Consumer Finances, released in February 2009.

Yet many financial institutions will still tell you that credit cards make sense in retirement, provided you’re able to manage them responsibly. This means that credit card spending should never exceed your retirement income and you should always be able to pay your credit cards in full each month.

Debt Relief Solutions

Fortunately, there are several things you can do to reduce your debt if you’re currently retired or approaching retirement. If you have too much debt, an attorney negotiated debt settlement can help. Our attorneys negotiate large reductions in the balance claimed by your creditors, without the need for bankruptcy. Debt settlement can be a very effective way for retirees or would-be retirees to eliminate debt, allowing them the retirement they have worked so hard for.

For more information on settling debts before or during retirement, contact the attorneys at McCarthy Law today. We offer a free consultation with an attorney for all those looking for a workable solution to their debt.

Getting Rid of Debt Before or During Retirement was last modified: November 3rd, 2014 by Kevin Fallon McCarthy
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