Steps to Take to Avoid Retiring in Debt

National debt is a massive problem in our country and there’s no shortage of advertising reminding us that we need to pay off our personal debts. Sadly, statistics clearly indicate that the numbers of individuals who are retiring in debt are on the increase, so much so that over half of those who retire are in the red.

Earlier this year Newsweek reported that the golden years have been severely tarnished with mounting medical expenses, rising credit card debt, and little or no savings.  Newsweek stated that a law professor at the University of Michigan found that individuals over the age of 55 now account for more than 20 percent of all bankruptcies in the U.S.  CESI Debt Solutions, a nonprofit personal-finance firm, conducted a study and discovered that 56 percent of retirees carried outstanding debts with them as they left the workforce.

CESI Debt Solutions also discovered that 40 percent of Americans who were surveyed are intentionally accumulating credit card debt and are not concerned about paying it back before they pass away.  One of the suspected factors behind this reasoning is that the recent recession slashed many retirement accounts by at least half.

There are other retirees that are still worried about their debt and are seeking debt counseling.  Long-term financial planning has taken its toll because of the American economy over the past few years and those who have some savings left, are desperately trying to re-focus and search for some type of solution.

If You Can – Take Preventative Measures

Debt trapNo matter what age you are, start reviewing your goals by taking a serious look at financial planning – especially if you are nearing retirement age.  Reviewing your current financial plan is essential to ensure it is still valid.  If anything has gone wrong at least you can determine what unexpected variables have popped up that you must adapt to.

Before you plan on doing anything, you may have to change your way of thinking.  Retirement used to be a given, but those days are long gone.  If you have a circle of friends who are retiring early or are able to retire at 65 years old, it’s so important not to compare, or live up to their goals.  Everyone is unique and there are no two situations that are identical.  It sure won’t be easy, but losing the mindset that “everyone else is doing it” is crucial to your emotional and financial well-being.

If you have to, then keep working.  There’s nothing wrong with delaying retirement to pay down debt.  It may not be as bad as you think – if you must work another two to four years to pay down or pay off your debt , it’s also an opportunity to continue building a nest egg, and this will possibly make it even better than you originally planned.

If need be, find alternative income.  Perhaps what you have saved is mediocre but not enough to carry you past a few years. A part-time job may be enough to provide some income in order to supplement your savings.

Some individuals contemplate the thought of actually using what’s left in their retirement savings to pay down or pay off their debt.  This decision should never be made in haste and must be very carefully considered.  Seeking financial advice is recommended before making any final decision.

Some credit experts have made suggestions to their clients that taking social security benefits early to pay off debt is advisable.  One thing is a given, unless credit card payments are well in excess of the minimum payment due, the balance is barely being touched as it is mostly monthly interest that’s being paid.  Dipping into social security benefits is not smart to do unless you have done some serious number crunching first.  Most financial advisers feel that should you decide to take this route, then the longer you wait to tap into social security the higher your benefits will be.  Regardless, dipping into social security benefits should be the very last consideration you ponder.

Taking an in-depth look to reduce expenses may be the answer you’re looking at to help hack at debt.  Perhaps something as simple as not purchasing a cup of coffee every day can save you a quick $45 a month – and that’s more money to go into paying down debt.

One other step to take to help reduce or eliminate debt before you retire is to consider a reverse mortgage.  This is a loan that allows the homeowner (minimum 62 years of age) to convert part of their home equity into tax-free income.  Fees for this may be high but speaking to a financial or mortgage expert is highly recommended when considering this as an option.

All is not lost, there are solutions to be found, but arriving at them may take time.  Remember, gone are the days of mandatory retirement – and many people are thankful for this because they like to work.  Take advantage of working a couple more years – it may just be want you need to eliminate your debt and truly enjoy your golden years!

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Published or updated December 6, 2012.


  1. That’s pretty sad. What a legacy to leave. Used to be (in my grandparents generation) you didn’t have any debt period, except for maybe a mortgage. They didn’t have car loans or anything like that. They saved up and they bought in cash. When the retired, and even after they died, they didn’t have a lot, but one thing they didn’t have is debt. What an awful mess to leave behind by those who are actually accumulating debt not caring what happens after they leave this world.

  2. Jenna, Adaptu Community Manager says:

    Who assumes debt after someone passes away, especially credit card debt? Family members? What if the person in question has none?

  3. Isn’t this one generation removed from the depression era? I don’t know what happened because many of their parents grew up in the depression. Since 55 is on the edge of the Baby Boomer generation this will materially affect succeeding generations. They will be unable to retire, stay on their jobs longer and leave debt for their estates. Nice legacy! Although I am part of this Baby Boomer generation, my values and principles are very different.

  4. I think the issue is that people did not anticipate so much change, or started out with unrealistic retirement goals. Although it’s a nice thought, we can’t all retire to a tropical paradise. It’s so important to set attainable goals and start working towards them while your younger. I think the younger generation should take this as a lesson in smart financial planning. Use only what you need, and save the rest! You’ll be glad you did.

  5. cat@babyboomerresource says:

    These are some good tips. Unfortunately to looks like a lot of us baby boomers will be working long into our retirement years. I think we were just having to much fun being free to really think about the future. I myself never thought I’d live this long and still don’t know if i’ll be around when retirement hits.

  6. Some good tips here. I think the reality for many people is that they will have to keep working past 65, especially if they haven’t put their ducks in a row at an early age. I may be in that boat and it isn’t such a bad thing as I’d be at my wit’s end if I retired. Still, would be nice to have the choice.

  7. Love to hear your take on Brexit and how that may affect an individual’s retirement accounts

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