By the end of 2018, over-65s are expected to owe a collective £86 billion, according to research from More 2 Life. If left unchecked, this figure could reach £142 billion in 10 years.
Are you, or is someone you know, affected by this?
If so, read on, and please share these tips with anyone you know who may be in a similar position.
Dealing with debt in retirement
Managing debt is stressful at any time of life but owing large amounts during retirement can bring increased pressure. Indeed, it might even stop you from retiring, especially if the debt is large, such as an interest-only mortgage. This is due to limited income and a sense of urgency to reduce debts before passing away, so that they do not affect your ability to leave a legacy.
There are numerous ways to deal with debt and avoid taking it into retirement with you, including:
1. Avoid taking unnecessary credit
It might be tempting to borrow more money in order to pay off debt, especially with so many loans seemingly aimed at those struggling to keep up with their current financial commitments. However, most of this easy-to-access credit comes with sky-high interest rates and is designed to ensure that you pay back a lot more than you borrow in the first place.
2. Use what you already have
If you have property, you may wish to consider downsizing, or releasing equity from it, in order to make sure that you are financially stable and can enjoy your non-working years. This will control the amount of debt you leave behind when you die, as your current debts are likely to amass more in interest and penalties than will be taken out of your estate to repay a lifetime mortgage.
3. Consider using savings and investments
If you have excess money tucked away to boost your retirement income, but you aren’t using it because of your current situation, you could choose to use some of those funds to relieve the pressure and repay some of what you owe. This will make it easier for you to gradually repay the rest and enable you to create a plan to support yourself financially throughout the rest of your retirement, without losing extra cash to interest rates and penalties.
4. Talk to your provider about your options
Arranging an appointment with a representative of the bank or building society to whom you are in debt can be an eye-opening experience. There are often processes and options in place to help people like you to be able to remain financially stable whilst keeping up with your responsibilities.
These options may include, making changes to your repayment plan, switching to a different product altogether, or finding an alternative solution to your issue.
5. Engage with a financial planner or adviser
If you are struggling to find the best way to manage your money to repay debts, please get in touch with us.
We can offer you solutions and strategies which suit you and your financial position.
People who talk to a professional benefit from increased confidence in making financial decisions, the knowledge that they have a professional in their corner and suggestions of strategies and options they may not have previously known about.
6. Debt charities
If you, or someone you know does not have the income or capital in place to work their way out of debt, please engage with a non-profit organisation like Step Change or pass their contact details on to those who need it.