6 Smart Ways to Deal With Debt in Retirement
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A “rapidly growing” number of households have debt in retirement, raising concerns about the financial well-being of older adults, according to researchers at the Center for Retirement Research at Boston College.
Managing debt can be especially challenging in retirement, given that your income typically drops and your medical expenses increase. On the other hand, many older Americans have assets that can come in handy for dealing with debt and often a wider range of lifestyle options to leverage.
To be clear, debt in retirement isn’t always bad: For example, many Americans currently have low-interest-rate mortgages, including those who bought a home or refinanced before the Federal Reserve began hiking rates in 2022, and there's no need for retirees to rush to pay these off. Plus, when you can earn 5% or more on bank CDs, you’re probably better off investing money you might otherwise use to pay off your mortgage, says Alexander Davis, financial advisor at Carroll Advisory Group.
But what can be problematic is high-interest-rate debt, like payday loans, credit card balances and personal loans. Inflation is also forcing many lower-income individuals to rely on debt to keep up with expenses like food, housing and medical bills, says Josh Hodges, chief customer officer at the National Council on Aging.
Fortunately, there are resources, strategies and people out there to help you deal with this.
