A growing number of older adults are in debt in retirement, according to the 2022 Survey of Consumer Finances from the Federal Reserve. Among people ages 65 to 74, the share with debt rose to 65% in 2022, up from 50% in 1989 (the first time this question was asked). For people 75 and over, 53% report holding debt in 2022 versus 21% in 1989. This is a big challenge, since people’s income in retirement is traditionally limited. But there are strategies for tackling your balance sheet later in life.
Take note: Not all debt is bad debt. “It’s not necessarily the worst thing to have,” says Jack Heintzelman, a certified financial planner in Boston. If it’s debt that earns you a tax deduction, he says, like a mortgage, it may be fine to hang onto it while you give your money elsewhere a chance to grow.
But if debt is straining your retirement budget or you’re paying a high interest rate, a pay-it-off plan is key. Here are some methods that can help.
PICK UP SIDE WORK
The traditional retirement model — work for 40 years and then quit forever — may not be the most appropriate approach anymore. Supplementing retirement savings and Social Security benefits with part-time earnings can make your money go further and help you pay off remaining debt.
For some people, consulting in their field is a natural step between full-time work and full-time play. Other people can monetize an interest or pick up hourly work a few days a week.
“We have a client who works in a music repair shop for part-time income,” says Colin Day, a CFP in St. Louis. “They get to explore their hobby while also getting some level of income.”
CONSIDER MOVING OR DOWNSIZING
Your home is usually one of your biggest expenses, and if you live in a high-cost area, you might be paying high property taxes and maintenance costs, which eat into your ability to pay for other things.
Moving to a smaller home or to an area with a lower cost of living can free up room in your budget. You might also get…
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