In 2020, the total amount of consumer debt in the United States grew to a whopping $800 billion. Individuals in the Silent Generation (age 75 and up) carried an average of around $40,000 in debt while Baby Boomers (age 56 to 74) held an average debt load of more than $96,000.
If you're an older adult with debt, you're certainly not alone. But there are a number of ways you can deal with that debt. Understanding your options is the first step to creating a more stable financial future or meeting your money goals in life. Check out seven options for dealing with debt as a senior below to see if one might be right for you.
The first step to dealing with debt at any age is to understand your situation inside and out. If you don't know how much income you have or how much you're spending, you can end up growing debt or getting back into debt before you know it. Follow the steps below to understand your income and expenses and make a plan for managing your financial resources.
If you don't think you can cut down on expenses, another option is to generate more income. You can use that income to pay down debt faster. Retired adults may need to balance how much they make with thresholds that could impact their benefits or tax burdens, so consider consulting a tax or finance professional before you take this step.
Some options for making more money as a retired adult include:
If you have a mortgage, your home may be one of your biggest monthly expenses. If you don't, you could have a lot of value in the home that could be used to pay down debt or fund living expenses.
Consider selling your home, especially if the market is hot and you can get a good price. You might consider downsizing into an assisted living community such as Hickory Villa in Omaha, where many living expenses are lumped together under a single payment to provide convenience, peace of mind and potential savings.
If you're not ready to move out of your house yet but have a good amount of equity in it, you could consider a reverse mortgage. These are loans you take out that pay you a single lump sum or an ongoing sum each month. The money is secured by value in your home, and it doesn't have to be paid back until you sell the home or move out.
Depending on your financial situation, a reverse mortgage could be a way to handle your other debts so you can live in your home without a financial burden.
If you no longer need life insurance because your beneficiaries are all grown and financially set, you might consider cashing out any policies with value to pay off your debts now. That's especially true if you only have the policies to ensure the debts can be paid later.
As with other tips on this list, if you're making any changes to estate plans or other long-term plans, it's a good idea to consult a professional for advice.
In some cases, you might be able to make it easier to pay down debt by reducing your interest rates. If you've worked with a lender for years or decades and are an account-holder in good standing, it doesn't hurt to ask. Simply call the customer service line and ask if you might qualify for a reduction in interest.
If you're dealing with credit card debt and have decent credit, apply for a balance transfer card with a 0% introductory offer. You can transfer higher-interest balances to it and pay it off faster because you won't be paying for interest during the introductory period.
If you're dealing with crippling debt and none of these options will work for you, it might be time to consider bankruptcy. Contact a bankruptcy attorney to find out more about your options.