The elderly in the U.S. are experiencing high levels of debt today compared to the previous generations. Senior citizens typically struggle due to mortgage debt, 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 62 years of age have the highest student loan balances at an average of $49,375.

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?

Retirement debt relief refers to a collection of strategies that make it easier to pay off debts. 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.  Having a clear understanding of how debt relief in retirement works is important.

“The best way to pay off debt when you're retired is all about good financial planning before you retire,” says Teresa Dodson, a debt expert and the founder of Greenbacks Consulting. “The goal is to have next to no debt once you retire since, typically, your income is fixed and/or reduced. But if after you retire, you find yourself drowning in debt, debt resolution is the best solution,” adds Dodson.

A personalized debt resolution program can combine one or many of these strategies. 

8 Ways To Pay Off Debts When You’re Retired 

Debt can be intimidating and can stop you from enjoying your retirement. Fortunately, there are many debt relief options available to help you pay off your debt faster.

1. Debt Consolidation

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 debt consolidation loan with low interest. Interest rates will vary based on your current credit score and the financial institution you choose. Work with a debt professional who 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 before the end of the promotional period to avoid interest.

Make regular payments towards your consolidation loan or balance transfer credit card to pay off your debt at the earliest.  

2. 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 retirement debt relief option for seniors with large debts that may lead to bankruptcy. You can save up to 50% on your debt before fees with a program like this and avoid bankruptcy.

3. Debt Management

You can also enroll your high-interest debts into a debt management program. A professional counselor 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.

Credit counselors 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.

4. Credit Counseling

There are many nonprofit organizations out there that can help you manage your debt. A credit counseling agency will conduct a comprehensive financial review and offer personalized advice that can get you on the right track and empower you.

Sometimes, all you need is to take a detailed look at your expenses, income, and debts. Credit counseling can be a good option if you want help with budgeting and managing your finances. 

5. Downsizing

You may also want to consider downsizing before you seek retirement debt relief. 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.    

6. 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.

You can also apply for food benefit programs, such as SNAP, to save money on groceries. The money you save can then be used to boost debt repayment.  

7. Bankruptcy

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.

8. Forced Takeover

In certain situations, children of seniors may have to do a forced takeover of their finances. Alzheimer’s disease affects 6.9 million Americans aged 65 and older. 73% of those are ages 75 and older.

Seniors are vulnerable to financial exploitation and scams. Scams targeting seniors resulted in losses of $3.1 billion, often leaving victims with no way to recoup their losses.

To protect the financial health of their parents, children may sometimes have to take control of their finances.

When To Look For Retirement Debt Relief

Retirement debt relief options may 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. In 2023, the average credit card debt for baby boomers was $6,601. With fixed retirement income and high interest rates, it can be difficult to pay down balances.

If you have high-interest rate debts, it may be necessary to talk to a professional.

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. Bankruptcy has the most lasting impact on your credit. Compared to bankruptcy, debt settlement has a lower impact.

Depending on your unique financial situation, you should 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 debt relief companies that offer programs to help you get out of debt. However, it’s important to choose the best available to ensure you get the results you are looking for.

It’s also vital to compare the programs they offer, minimum debt enrollment amounts, fee structure, and reviews. Choose to work with a company that has a good track record of success, has experience working with older adults, and offers a free consultation.

Regain Control of Your Finances With Retirement Debt Relief

Older Americans 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’s possible to regain control of your debt even in retirement.