Retirement Debt Relief: 8 Ways to Pay Off Debt When You Are Retired
9 MIN READ
Published April 06, 2023 | Updated April 27, 2023
The elderly in the U.S. are experiencing high levels of debt today compared to the previous generations. Senior citizens typically experience debts from mortgages, medical costs, and credit cards. Surprisingly, they are also the fastest-growing group with student loan debt.
Whether student loans are taken for their own education, for their children, or for grandchildren, people over 60 years of age had $86 billion in student loan debts in 2019 compared to $6 billion in 2004.
In 2019, households that were led by adults over the age of 65 with debt rose to 61% in 2016 from 38% in 2016.
Senior citizens have many resources available to correct the course and enjoy a debt-free retirement. Start with a realistic budget, make lifestyle tweaks, and seek retirement debt relief options as soon as possible to enjoy your golden years without stress.
What is Retirement Debt Relief?
Having a clear understanding of how debt relief while in retirement works is important. Debt relief programs offered by nonprofit and for-profit organizations can help you:
- Pay off your debt faster.
- Negotiate with lenders to lower debt amount.
- Consolidate debts into a single, more manageable payment plan.
- Lower your interest rates.
For most seniors, Social Security and retirement savings are the primary sources of income in their retirement plan. Older people with large debts may find that most of their income is being eaten up by debt repayment. They may outlive their retirement savings.
A personalized debt resolution program can combine one or many of these strategies. TurboDebt can help you find which debt relief program is the best for your individual needs.
When to Look for Retirement Debt Relief
Retirement debt relief options will be right for you if you are dealing with overwhelming debt and don’t have a regular source of income to pay towards debt. You should also look into these programs if you are behind on your bills, have multiple types of debts, and are struggling to make debt payments.
Consumer debt levels are increasing throughout the country. The average debt for baby boomers was $96,087 in 2022 compared to $95,607 in 2021. While this is not a big jump, it is important to remember that most retired people can’t pay this debt without having a full-time job.
The average credit card balance for those in their 60s was also reported to be $6,832 in 2019 Q2 compared to $6,701 in 2018 Q2.
How Your Credit Score is Affected by Retirement Debt Relief
If you have accumulated considerable debt and are behind on your payments, your credit score may already be damaged.
Whether retirement debt relief programs will further impact your credit report will depend mainly on which option you choose.
Debt management and credit counseling have little or no negative impact on your credit. If you stick to the program and make regular payments, you can even be able to improve your credit. Bankruptcy has the most lasting impact on your credit. Comparatively, debt settlement has a lower impact.
Depending on your unique financial situation, TurboDebt can help you choose a debt relief option that provides you the most relief with the least impact on your credit.
Choose the Best Retirement Debt Relief Company to Work With
There are many great debt relief companies available to work with today, but it’s important to choose the best available to ensure you get the results you are looking for. It’s also key to avoid any organization that may try to take advantage of vulnerable senior citizens. Be aware of the signs of a scam and only work with reliable, trustworthy companies with a proven track record and good reviews.
Here are a few red flags to look out for:
- Offering guaranteed results.
- Claiming that all your debt will disappear.
- Charging upfront fees before delivering any services.
- Claiming to settle all your debts.
Retirement Debt Relief Programs to Get You Out of Debt
Debt can be intimidating and can stop you from enjoying your retirement. Fortunately, there are many debt relief programs available to help you pay off your debt faster.
If you have multiple credit cards, personal loans, and other unsecured debts, it is best to consolidate all of them into a single loan with a single monthly payment.
If your credit is fair, you may be eligible to get a lower settlement amount. Interest rates will vary based on your current credit score and the financial institution you choose. Work with a debt professional that can help you find a personal loan with the lowest rates.
You can also opt for a 0% balance transfer credit card. This can be a good solution if you manage to pay off your entire debt within the set timeframe to avoid interest.
Make regular payments towards your consolidation loan or balance transfer credit card to pay off your debt at the earliest.
Debt Settlement Programs
A debt settlement program can help you settle your debt for less than what you currently owe. If you work with a debt settlement company, they can negotiate with your creditors on your behalf to agree to a lower settlement amount.
This is a good solution for seniors with high debt that may end up going to collections and lead to bankruptcy. You can save up to 50% on your debt before fees with a program like this and avoid bankruptcy.
You can also enroll your high-interest debts into a debt management program. A professional financial advisor can work with you every step of the way and help you come up with a payment structure that will help you pay off your debt faster.
Financial planners can even negotiate with your lenders to get your fees and penalties erased or reduced. They may even be able to negotiate lower interest rates on your debts. Overall, this is an easy and effective solution to regain control of your finances.
Alternatives to Retirement Debt Relief Programs
Other than the options listed above, there are also several other alternative solutions available for seniors.
There are many organizations out there that can help you manage your debt. A credit counseling company will conduct a comprehensive financial review and offer personalized advice that can get you on the right track and empower you.
When looking for credit counselors, work with an organization with strict standards for protecting consumers. Look for companies that are backed by the Financial Counseling Association of America or the National Foundation for Credit Counseling.
There may be many areas of your life that may need a little financial fine-tuning. Downsizing in some of these areas may sometimes be a good way of freeing up some money to pay your debts.
If you are dealing with a high auto loan payment, using public transportation or switching to an older model can be cost-effective.
Housing is another area that can be downsized. This will also allow you to take advantage of your home equity. This may require a huge lifestyle change and will require a lot of planning. If you are uncomfortable with such a huge change, start with small lifestyle tweaks.
You may even want to consider a part-time job to add to your retirement income.
Dialing back some of your spending can sometimes make a considerable difference.
Government Assistance Programs
Some retirees may qualify for government assistance programs to help them pay their Medicare premiums, copayments, and deductibles. Eligibility for the Medicare Savings Program can vary depending on the state you reside in.
The Administration on Aging is another organization that is specifically designed to protect the well-being of seniors. The organization offers a number of resources and support, such as legal aid to protect seniors against financial exploitation, health care, health insurance, wellness, and long-term care.
The AoA also provides support to older Americans who may be harassed by lenders. Any Social Security benefits that are deposited in your account directly cannot be garnished by collectors.
Bankruptcy is often associated with stigma, but sometimes it may be the only option for seniors buried under a considerable amount of debt.
Depending on your situation, you may be able to file for Chapter 7 or Chapter 13 bankruptcy to discharge most of your debts.
Bankruptcy can impact any future financing, but it can give you a fresh start while keeping your retirement accounts safe.
In certain situations, children of seniors may have to do a forced takeover of their finances. Alzheimer’s disease affects one in nine people over the age of 64. 32% of those aged 85 and above have this disease.
Seniors are vulnerable to financial exploitation and scams. In fact, one in ten people aged 60 and above has been a victim of financial abuse or fraud. Each year, scams cost seniors $3 billion.
To protect the financial health of their parents, children may sometimes have to take control of their finances.
Senior citizens are vulnerable to financial abuse and fraud. Working with a reputed retirement debt relief company is crucial to protect their retirement savings. With counseling, budgeting, and the right strategies, it is possible to regain control of your debt even in retirement.
If you are dealing with debt in retirement, connect with TurboDebt for a free consultation today. Our team can offer counseling, consultation, and financial planning services to help you pay off your debt faster.
Here’s what our satisfied clients are saying about our debt relief services.