You are entering your golden years, where you should be able to relax after a lifetime of hard work. However, you may find that it is not always the case. Today, an increased number of seniors find themselves dealing with debt as they head into retirement.
Households headed by older adults with debt increased from 41.5% in 1992 to 60% in 2016. There are various reasons why a person may end up with debt. Fortunately, there are multiple options for debt relief for seniors. Continue reading to learn how you can manage your debt.
Why You May End Up with Debt
Taking Out Student Loans
When people think of college students, 18 to 20-year-olds usually come to mind. However, there are plenty of older adults who go back to school. There are several reasons why seniors become students again. Some may want to finish what they started, while others hope to remain competitive in the workforce.
College tuition can drain any bank account, and costs have increased over the years. Thousands of people take out student loans to pay for each semester. It is a well-known fact that student loan debt is a major problem.
While millennials usually are the ones who suffer from this financial crisis, more older adults are borrowing money. Student loan debt has increased by 71.5% in this age group over the last five years. Interest rates can be as high as 7.6%, and Social Security benefits tend to take a hit when making debt payments.
Facing Expensive Medical Bills
One of the biggest concerns for many people in the United States is health care. Millions of people struggle with medical debt every year. Over the years, it has proven to be a serious barrier to an older adult’s economic well-being.
Many people develop medical conditions as they age. After all, it is a normal part of getting older. Around 84% of adults over the age of 64 have at least one chronic condition. The good news is that they likely can find treatment. The bad news is that health care costs have gone up, which means larger credit card bills.
One of the main causes of medical debt is the cost of treatment. Medication may end up in the hundreds, and you might need to spend thousands of dollars on surgery. While insurance can cover a portion of the bill, there are still other things you have to pay. Some of them include:
- Copay
- Coinsurance
- Health care services that are not covered
- Deductibles
Taking Out a Mortgage
Another common source of senior debt is a mortgage. Studies have shown that older adults were three times more likely to have a mortgage in 2015 compared to 30 years ago. Fewer seniors are paying theirs off.
More older adults are choosing homeownership since it provides better predictability than renting an apartment. One of the reasons they carry a mortgage into retirement is due to tax incentives. Not to mention, mortgage interest rates typically are a low-cost form of borrowing.
However, older adults will have to pay off thousands of dollars in debt. In 2016, 29.2% of senior households owed money on a mortgage. The average amount was estimated to be $65,800.
Tips for Debt Relief for Seniors
Adjust Your Lifestyle
Adjusting one’s lifestyle can help with debt relief for seniors. Some tips to accomplish this are:
- Limit traveling. Try to stop any travel plans temporarily to help save money. Gas or plane tickets can be costly. Not to mention, there is food and lodging you have to consider.
- Get a roommate. Roommates are useful when it comes to paying housing costs. You will only need to worry about a portion of the rent and utilities. Start planning on having someone else live with you temporarily.
- Cut back on spending. Canceling unnecessary subscriptions and dining out less can free up money. You can reduce your debt with a little more ease.
It can help to move to a smaller house or a cheaper apartment as well. If you need extra money for bills, you can sell a car, an RV, or other valuable equipment. Making the necessary changes to your lifestyle may not seem all that fun, but it will improve your economic well-being.
Pay Bills on Time
Experts suggest that paying your bills on time is a useful step in getting debt under control. While it is helpful to focus on one debt at a time, it is necessary to keep other bills in mind. Be sure to pay all your bills on time. Doing so will allow you to avoid the potential hassle of late fees.
As you are making payments, prioritize your debts. Pay more for the one with the highest interest. Those with a high-interest rate can easily spiral out of control. Older adults may find themselves owing more money over time. Diverting more funds to these types of debts will benefit you in the long run.
It is critical to make the minimum payments to any other debts. If you do not, then the interest rate can increase. As a result, the minimum payment will not be as affordable as it once was. Not to mention, there may be penalty fees.
Consider Debt Consolidation
Another step toward debt relief for seniors is choosing a program to help manage financial struggles. If you have various debts, then debt consolidation may be beneficial for you. Debt consolidation is the process of using a loan to combine multiple credit card debts into a single payment.
While it does not reduce your debt, debt consolidation will make it easier for you to pay it off. There are different options available.
Consider Debt Settlement
When it comes to debt relief for seniors, debt settlement can be a useful solution. Debt settlement is when a firm negotiates with creditors on your behalf. The goal is to forgive or take an offer that is less than what you owe.
Debt settlement only works for unsecured debts. Debts that classify as unsecured include:
- Credit cards
- Medical bills
- Department store debts
- Cell phone debts
Mortgages and car loans are not unsecured debts. Make sure to have all your credit card statements together so that the firm can determine the best direction to take. Under a debt settlement program, you can repay your debts within a few years.
DebtBlue
Whether it is credit card debt or medical bills, DebtBlue is here to help you. The DebtBlue team is dedicated to providing debt relief for seniors. We are a debt settlement firm that will listen to your situation and help you reduce a portion of your debt. To learn if debt settlement is right for you, contact us today.