Ask the Advisor: September 2018

Ask the Advisor: September 2018

How Can We Cope With Debt In Retirement?

Q:  My husband survived cancer but his healthcare costs depleted our savings.  Do you have suggestions for coping with debt in retirement?

A:  Debt among older Americans is rising and affecting a growing number of retirees.  According to the Survey of Consumer Finances, the percentage of households with debt headed by an adult age 65 and older increased from 41.5% in 1992, to 60% in 2016.  Medical debt poses the biggest challenge over the course of a retirement.

According to the National Council on Aging, 34% of older households hold credit card balances, and another 29% still owe money on a mortgage, home equity line of credit, or both.  Digging out requires work and making changes.  Reducing debt requires increasing income, restructuring your budget, and other changes.  Here are some things to consider:

  • Try going back to work or getting a second job. — Reducing costs is often the harder choice, because costs tend to grow with age.   You may want to consider getting a job that could provide extra income and perhaps help with health benefits.  Even if you must stay at home as a caregiver, you may want to consider providing adult day care to another individual if your home is set up for that, or to find a job that allows you to work online from home.
  • Know what debt you have.  Make a list of your mortgage, any home equity line of credit (HELOC), credit cards, and any other debt.  Making minimum payments may keep you out of collections, but that strategy doesn’t pay off debt.  Prioritize your loans by the amount of interest, and whether the interest (such as for a mortgage) is tax deductible.  Work out a plan to pay off the highest non-deductible interest loan first, while making the minimum payments on other loans.  As you get a loan paid off, start on the next highest interest loan.
  • Consider selling off personal effects that you aren’t using.  If you have antiques and collectibles, or just an attic full of stuff in storage, consider selling it by auction, Ebay, or to dealers.  Consumer Reports has this advice on “The Best Ways to Sell Your Stuff.”
  • Give yourself a Benefits Check Up:  If your savings are gone, and you aren’t able to get a side job, you might qualify for programs that can help pay for Medicare Part B premiums, drug costs, meals, heating and cooling your home, rental subsidies and other costs.  Using the National Council on Aging’s Benefits Check Up online tool is simple.  You answer a few screening questions and you can get the contact information for programs in your area.