Retirement should be a time when people can sit back and enjoy the golden years in life, not rack up retiree debt. After working for years to prepare financially, retirees should be able to shift their focus to their families and hobbies without worrying about high living expenses. In the past, many people reached retirement with pension plans and 401K savings that covered the cost of living. But as the economy has changed, more and more people are carrying debt into retirement with few solutions to regain financial independence.
Debt From Insufficient Income
To live comfortably, payouts from retirement funds and Social Security need to be high enough to cover the cost of living. But many retirees experience a decrease in their income when they stop working. Even if money is set aside, it often isn’t enough to pay for all of the bills. If your retirement income is too low, then you may find yourself retired and in debt due to the standard living expenses for housing, food, healthcare and more.
Adjusting Spending Habits as a Retiree
To make matters worse, it can be a challenge to adjust spending habits when adjusting to a retirement income. A retiree and their family were probably accustomed to a full-time income that supported travel, hobbies, shopping, and more. Too often, retirees find it difficult to change a lifetime of spending habits and end up racking up retiree debt as they try to maintain their previous lifestyle on a fraction of the income. In addition, the area a person retires in may be too expensive to stay in when on a reduced income. This too can make it all too easy to accumulate debt.
Debt From Rising Medical Costs
Not only are medical costs increasing, but the need for medical care also goes up with age. The normal aging process leads to a need for more prescriptions, doctor’s visits, surgeries, and other necessary treatments. Often, retirees have chronic health conditions that require ongoing treatments, resulting in never-ending medical bills for the necessary services. Even if retirees have good insurance coverage, the increasing costs of medical care can result in an accumulation of debt.
Living Longer as a Retiree
With all of the advances in the healthcare industry, people are living longer than ever before. The extended lifespan increases the need for retirement savings, and many retirees aren’t prepared with the additional money needed for an extra 10 or 20 years of life. Some retirees choose to work past normal retirement age, but they are still unable to save the full amount needed for a longer lifespan and to avoid retiree debt.
Debt From Moving Expenses
At some point, it is necessary to downsize from the family home into a smaller retirement-friendly housing situation. When it is time to move, costs can contribute to debt concerns. These costs might be related to services needed for packing, moving trucks, labor, buying a new home, and more.
Debt From Long Term Care Costs
If it is necessary for a person to move into a long-term care facility, costs can quickly add up creating a high level of retiree debt. The costs of long-term care are expensive, with families accumulating thousands of dollars in debt each month to pay for the caregiving services that are required. These debt expenses can add up for both live-in facilities and in-home care.
Higher Cost of Living as a retiree
Many people are shocked at the rates in which the cost of living is increasing each year. Rent costs, housing expenses, taxes, vehicles, and the cost of food are all on the rise. Even if retirees are prepared with strong retirement savings, the money isn’t always sufficient to cover the basics of life. A person can only do so much to simplify their lifestyles, which means that it is common for people to face retiree debt struggles as they work to keep up with these increasing costs. The annual cost of living in retirement is significantly higher now than in the past, which means that managing debt in retirement has become much more difficult and many retirees are underprepared to cope with increasing costs.
Emergency Expenses for retirees
When retirees are living on a fixed income, one emergency can result in dire financial challenges. Medical emergencies aren’t the only reason for retiree debt. Other unexpected emergencies could be due to car repairs, home disasters, family emergencies, and more. If a big, unexpected cost comes up, retirees often take on debt because they don’t have the cash needed for the expense.
Maintenance Costs as a Retiree
Home repairs can be costly, especially when retirees are living in an older home. If the roof starts leaking or the HVAC system needs to be replaced, then it can result in thousands of dollars in debt to pay for the necessary repairs. Retirees don’t often have this money set aside in a savings account, so the money has to be borrowed, either via a loan or a credit card which can quickly add to your debt burden entering retirement .
Financial Scams Increasing Debt
Aging adults are often targeted by scammers because they can be naïve when it comes to some of the most common scams. It is common for these people to target retirees and add to retiree debt with fake business opportunities, such as starting an online business, multi-level marketing programs, flipping real estate seminars, and more. Additionally, retirees are more susceptible to online data theft since they aren’t always as savvy with technology as the younger generations.
Solutions for Retiree Debt
Retirees should be living off wealth that has amassed through their working years, but too often people are drowning in debt instead. Most financial advisors recommend having as little debt as possible when moving into retirement, including a mortgage that is paid in full. Since retirement income is limited, it is smart to prepare as much as possible to avoid debt in retirement.
Even if you don’t think you’ll be paying off debt before retirement, it doesn’t mean that you are out of options. Various debt management programs can be used to turn around your financial situation and help you get back into financial peace. Debt consolidation and debt negotiation are two cost effective solutions that can help alleviate retiree debt and help you enjoy retirement in peace.