Avoiding Debt Problems during Retirement

How to manage debt in your golden years to promote financial stability.

Debt problems are never easy, but they’re made more difficult when you’re a senior living on a limited fixed income. That’s why it’s critical to take steps to ensure you have an effective debt management strategy and to take aggressive, early action if your debt starts to get out of control.

The tips below are designed to help you manage debt effectively in your golden years to avoid debt problems. If you’re already in trouble and need help to reestablish financial stability call us at or complete an online application to request a confidential debt and budget evaluation from a certified credit counselor at no charge.

Tip No. 1: Minimize debt before your paychecks stop

If you’re still working full or part-time close to retirement age, one step you should take before you leave your job for good is to minimize unsecured debts as much as possible. The less debt you have on your plate, the fewer bills you’ll have to worry about draining your Social Security and retirement assets.

Tip No. 2: Go part-time to pay it off

If you’ve already left full-time employment and find yourself struggling with too many obligations, take a part-time job to supplement your retirement income until you’ve paid off any debt overhang you may have.

Even if you have a lot of debt, it’s still finite – there’s a certain amount that you know you need to pay and then you’re done. So get a part-time job that you can keep for the time being while you eliminate debt. You can even use free tools like a credit card debt calculator and mortgage payment calculator to determine exactly what you need to earn and how long it will take to pay down what you owe.

Tip No. 3: Avoid new debt that will get you into trouble

Of course, you may not be able to avoid debt entirely, but you can at least avoid high-risk debt that often leads to problems. Here are the three biggest offenders when it comes to debts that cause problems for seniors:

Tip No. 4: If you’re using your equity, go for HECM

A Home Equity Conversion Mortgage (HECM) is the official name for a federally-insured reverse mortgage. It’s like a home equity loan in that it allows you to access and use equity you have built up in the long-term value of your home. However, there’s one very significant difference – no monthly payments that can get you into trouble with foreclosure!

A reverse mortgage is a home equity loan option only available to seniors age 62 or older who own their home and live in that property as their primary residence. If you meet the requirements, you can borrow against your equity (the value of your home minus any remaining balance on your mortgage) in a relatively risk-free way.

The only things you have to do to guarantee that you won’t have monthly payments to make is to maintain the home, pay the taxes and insurance and continue to live there as a primary residence. So while home equity loans are risky, Home Equity Conversion Mortgages are a much better and safer option.

Tip No. 5: Be selfish when you have to be

If you have children and grandchildren, then there’s a possibility that at some point during your retirement someone is going to ask you to help them out. Whether it’s giving them “loans” that may or may not ever be repaid or moving adult family into the house with you because they can’t afford to live on their own, this generosity is going to cost you… and on a limited fixed income that cost often ends up being too high for you to manage.

So while you don’t want your children (and worse, grandchildren) out on the street, you have to set some limits on what actually counts as a critical need. For instance, if your daughter lives loses her job and the family is about to get evicted, then you might have no other choice than to help about to avoid them becoming homeless. On the other hand, if the same daughter quits her job and then needs money to make the monthly payments on a luxury car she refuses to sell, that may be another story.

Tip No. 6: Stay up-to-date on scams

Fraudsters and thieves like to target seniors because (1) they have assets, (2) they’re often looking for new friends, relationships and interests, and (3) they’re not as savvy with new technology. So seniors are often easy-pickings for everything from internet phishing ploys via email to fake dating site profiles.

New technology often can’t avoided these days, so you have to know how to use the technology safely and how to avoid fraud or theft that can happen with the use of it. Consumer alerts can be helpful and websites like the AARP that have sections of their website dedicated to protecting seniors. In any case, avoid any scenario where your sending money or making transactions unless you’re absolutely sure you’re conducting the business or personal matter with a real, legitimate, above-board individual.

"We are really proud to recommend Consolidated Credit" Kathleen Cannon, President & CEO of United Way of Broward County. Consolidated Credit Counseling Services, Inc. is pleased to announce our partnership with the United Way as a United Way Chairman’s Circle Organization.

"We are really proud to recommend Consolidated Credit" Kathleen Cannon, President & CEO of United Way of Broward County. Consolidated Credit Counseling Services, Inc. is pleased to announce our partnership with the United Way as a United Way Chairman’s Circle Organization.

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With this amount of debt, you'd pay around $xx.xx on a DMP.

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