Many American seniors are taking their debt with them into retirement years. That’s according to new data from the latest University of Michigan Retirement Research Center Health and Retirement Study. The study—done annually since 1990—surveys more than 20,000 Americans age 50+ on their financial well-being. Those with debt, on average, have about $4,800 in credit card debt and $12,500 in total non-mortgage debt.
Carrying high-interest debt makes it easy to ruin the ability of older Americans to live a quality lifestyle in retirement. This only gets to be a more significant problem with the inevitable rising cost of their health care needs as they age.
Working with an elder law attorney, you can make the connection between debt and the need for institutional care: the higher the debt load, the less likely the individual will have enough cash assets to cover medical care that’s not provided by Medicare.
According to research, 40% of all older Americans have credit card debt over $5,000, and 20% of Americans age 50+ have more than $10,000 in credit card debt. Typically, those individuals with more than $10,000 in credit card debt couldn’t pay off their debt with all the assets they have.
Here are a few thoughts on how to manage debt before you retire:
- Pay down your debt. If you have a lot of high-interest credit card debt, pay that off before you put money into your 401(k).
- Cut the cord. Quit financially supporting your adult children and don’t take on more debt on your children’s behalf. Let them work on it the rest of their working lives.
- Downsize. Take action now to lower the costs of your housing and you’ll be able to make more room in your budget for your needs as you age.
- Wait to retirement. Spend a few more years in the workforce, and you’ll see a big difference. You’ll allow yourself more time to pay off debt before retirement and also delay the age at which you begin taking Social Security benefits. The longer you wait to claim your Social Security benefits, the bigger your monthly check.
Reference: KSDK (St. Louis) Five on Your Side (August 23, 2017) “Older Americans are getting crushed by debt”