Broker Check

How to Retire in a Rising Debt Crisis

| April 04, 2022
Share |

Retirement Planning Series: How to Retire in a Rising Debt Crisis


Surprise medical bills, student debt, natural disasters, investment losses- considering the host of problems that can arise in people’s lives, it is unsurprising that many people may find difficulty in retiring without debt. However, the number of people entering retirement with debt is rising exponentially, and their debts are becoming harsh. According to the Institute for Financial Literacy, people 55 and older accounted for 28.6% of bankruptcy filers in 2011, which is 5.7% higher than 2008- only three years prior. Moreover, seniors who may be less-than-savvy at modern scamming techniques are prime targets for mortgage modification scams, pricey loans, and “debt settlement” programs.

These debts can mean less spending money in your pocket and may indicate a lack of liquid assets that may be needed to deal with life’s financial surprises. According to Magnify Money’s Health and Retirement Study released November 2016, “More than one-third (37%) of all Americans over age 50 have a checking account balance less than $1,000.” This means that more than one third of Americans that are edging closer to retirement don’t have the cash needed to be able to retire.

However, if you are struggling with debt and the ability to retire, there are still a few ways to make sure you can retire without fear of debt. Here are 5 steps to retiring in a rising debt crisis.


Pay Down Debt

Different debts come with different interest rates and paying off the debts with the higher interest rates first can save you money in the long run. Credit cards are generally carrying the highest interest rate of all debt sources, and getting rid of that debt can save money in the long run.


Downsize Home

It’s also important to take a look into your assets and see what can be liquidated at this time. It can be intimidating moving from your home to a smaller, more affordable place, but ultimately it’s one of the easiest ways to get extra spending capital to pay down debt. Not only can this help eliminate or lessen hefty mortgage interest payments, you might be able to lessen other bills such as maintenance, insurance, and tax bills. It can also help reduce the number of chores you have to do around the house.


If you don’t want to sell your home just yet, you might be able to refinance your mortgage. With good credit, you may be able to restructure your loans and refinance your mortgage with potentially smaller interest rates.


Downsize Lifestyle

Additionally, look at your monthly bills to see if other areas of your life can be downsized. Downsizing may not be selling your home. Downsizing can also be going out to dinner less, making coffee from home instead of buying some to-go from your local coffee shop, going on less vacations, or even moving to a state with less state and/or local taxes. Have an expert take a look at your expenditures to see where you’re spending the most money and explore other ways you can cut back.

Delay Retirement

People are living longer than ever before, which means that no matter how you’ve been preparing for retirement, you might be living well beyond the average lifespan of almost 79 years. According to the Social Security Administration, it is predicted that people aged 65 today can expect to live (on average between 84.3 and 86.6 years). As modern medicine continues to expand and grow, one has to plan to live even longer than average, and then add a few years worth of money to ensure that unpleasant financial “surprises” are taken care of.

It can be frustrating to delay retirement, but a few more years of work might save you from financial heartache in the near future. No one should have to choose between paying mortgage payments and paying for medicine.

If continuing to work 9-5 seems like an insurmountable burden, consider working part-time in your industry, or even take on a position working part-time in a totally different career path. Take this opportunity to find something you love to do that can also be compensated. You’ll not only be able to reap some of the benefits of retiring, you’ll also have the chance to make an income you can use to pay your mortgage or save for the future. Working part-time can be a good interim step into retirement without the same burdens or stresses of working full-time.


Get Help

It can be intimidating working with debt and planning for retirement, but you’re not alone. At Capital Analysts of Jacksonville, our advisors pride themselves on providing the financial planning resources our clients need to make informed decisions about their retirement. Our ensemble operating style enables us to provide objective and comprehensive advice. Schedule a consultation online today or call (904) 730-7433.


Source: Magnify Money’s Health and Retirement Study Released November 2016


Disclaimer: This content was developed from sources believed to be providing accurate information. The information in this material is not intended to provide legal or tax advice. You should consult your legal or tax advisor for information concerning your individual situation.


Share |