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Retirement is supposed to mean freedom and it is supposed to mean doing the things in life that you didn't get to do before. Instead, many senior citizens are finding that their expenses are beyond what they thought they would be during retirement.
Income can be limited during retirement, which can make getting out of debt seem nearly impossible. The world of maxed out credit cards and a limited cash flow seems like something that describes the very young Canadian. Unfortunately, seniors are finding themselves in these situations. The good news, however, is that there are ways for retirees to climb out of the abyss known as debt.
In a report by Equifax Canada Inc, they showed that the average debt for a senior citizen over the age of 65 is growing at a rate of 6.5 percent year-over-year. This isn't surprising to some financial analysts, especially when the senior citizen is relatively young and they have depended on credit for years. The fact they have depended on credit for so long makes it an expected event. As time progresses, people become more accustomed to living beyond their means and this causes them to rack up debt in their youth. Much of this has to do with easy access to credit and the need for individuals to reward themselves.
The expectations of new seniors are very different from the expectations of older seniors. This is because they have fallen victim to all of the marketing that says seniors are entitled to a lavish lifestyle. There are television commercials that show seniors traveling the world, doing what they want, remodeling their homes, and having the finest of everything. The fact is that this is not necessarily the case. The reality is that many of these individuals are entering retirement with tens of thousands of dollars in debt.
These individuals have credit cards, lines of credit, car loans, and personal loans. They are finding these accounts nearly impossible to pay off with a fixed income. Financial advisers say that paying off this debt should be a top priority, especially since holding on to debt can be very expensive. During retirement, every dollar counts. For example, a person with a $60,000 spread across all of their credit card accounts combined with an average interest rate of 15 percent could result in approximately $8,500 in interest if only the minimum monthly payments are made. That is money that senior citizens cannot afford to cough up.
Ways To Pay Down Debt
There really isn't a perfect way to rectify this issue, but there are steps that seniors can take to get back in the black. Here are some things that you can do:
Get a job. Although retirement has been worked for and it is time to enjoy time away from work, having a job for a while can produce some additional income to tackle the bills. While going back to work after retirement can seem rather unappealing, a new job may be exactly what you need if you are healthy enough to work. Just making an extra $150 every week can make a difference in the amount of debt that you have.
Make risky investments. If you are not a risky investor, now may be the time to consider it. If you think you're too old to invest, think again. Your investing years are not behind you. In the past, retirement was mainly focused on money preservation and investing in low-risk options. The times have changed. However, investment returns have been on the anemic side for quite some time, especially for those individuals on a fixed income. Instead of gaining just a mere 1.5 percent on a safe investment, try something riskier that has a good track record of healthy returns. At the same time, make sure you have balance and diversity in your portfolio so that the impact from any losses can be absorbed.
Rent a home. Renters have a number of advantages. First, it's the landlord's responsibility to make repairs. Second, you can sell your existing home and live off of the money while you rent. The home is basically an investment that can be cashed in. If you have too much debt to live comfortably, then this may be a viable option for you. If you rent instead of buy a new home, you can avoid realtor commissions, land transfer taxes, and lawyer fees. You can then use the money to wipe out your debt and finally live comfortably.
Get help. Some retirees find themselves in very deep debt when they have helped their adult children financially. If you are a retiree who has helped your adult child at any point, it does not hurt to ask them for help. You just have to swallow your pride a little and go for it. Explain to them the amount of interest is being paid and how it is having an impact on your way of life. If your children or other relatives are unable to help you, you may need to consult with a debt and credit counselors. These individuals can sometimes negotiate better payment schedules and interest rates that can help you get out of debt sooner on your existing income.
It is ideal for you to try and find solutions in what is already available to you. You may be amazed at how many opportunities are out there from reverse mortgages and refinancing to investments. You may even have to think outside the box a little to find the solution that you are looking for.
Just because there is debt during retirement doesn't mean that the situation is hopeless. Take the time to figure out how much debt you are in and look at the options available to you. You may find that the solution is much easier than you thought.