Sadly, many retirees are bogged down by credit card debt and it isn’t because senior citizens tend to go wild with a credit card. The truth is that most debt incurrence takes place pre-retirement. “Typically, later on in the consumer credit life cycle, we don’t take on a lot of new debt,” John Ulzheimer, President of Consumer Education for Credit.com says. “The real challenge that retirees face is that there is no age-relation exclusion when it comes to debt assessment.”
While you can’t use retirement as a get-out-of-debt-free card, you do have options that members of the workforce don’t yet have. And while some of them can be a little scary (we understand your reluctance to file bankruptcy), they are all worth consideration. Here are some tips, straight from Credit.com’s Ulzheimer.
Don’t Pay the Minimum:
Whatever you do, don’t agree to pay the monthly minimum. Agreeing to do so only means that your debt is going to go nowhere fast and the idea, really, is to expedite a happy retirement.
“You’ll want to wipe [your debt] out as quickly as possible,” Ulzheimer says. “It’s not necessarily a bad idea to take a portion of your retirement funds to pay off what you owe.” Opting to use a pension fund, 401(k) or even certain life insurance policies may not sound too appealing, but if will provide a way for you to aggressively go after your debts.
Take Out a Reverse Mortgage:
“While retirees aren’t out buying new homes, they are refinancing existing ones,” Ulzheimer points out. If you are 62 or older and need to refinance, you should consider taking out a reverse mortgage.
Reverse mortgages allow homeowners to borrow money from banks against the equity of their home. Because the loan hinges on the value of your home, repayments on reverse mortgages are not required until your house is no longer your principal residence. Notably, your credit score won’t affect your chances of getting a reverse mortgage, but you will have to go through credit counseling before you are eligible (though, those in serious debt can probably use the advice.)