Debt worries in retirement

 

Prudential’s Class Of 2017 report also states that those retiring in debt do so owing an average of £24,300, up from one in five last year.

 

 

Prudential’s Class Of 2017 report also states that those retiring in debt do so owing an average of £24,300, up from one in five last year.

 

According to Debt Advice Foundation statistics, the age group with the highest average unsecured debt in January 2017 was the 55-64 age group, with credit cards and unsecured loans being the main cause of financial hardship. On average callers aged 55-64 will need 11 years to pay off their debts, with those aged 65 and above needing 8 years to pay them off.

 

Debt Advice Foundation CEO David Rodger said of the statistics;

 

“Debts during retirement are going to be an ever-increasing problem over the next couple of decades, due to the normalisation of credit. 

 

“However there are a number of practical things people can do as they approach retirement which will mean that they can achieve the type of retirement that they envisioned.”

 

So what can you do? As people retire, income naturally falls as a pension rarely matches pre-retirement wages and the servicing of debts and household expenses becomes much more difficult. So you can enjoy your retirement as you should, we would always advise paying off debt before you retire. 

 

To do this, you will need a clear understanding of your financial situation. Firstly, create a budget by looking at your last three months of bank statements and making a list all of your outgoings and monies coming in. You can then use this to see what income is available for you to use to start paying down on your debts. 

 

Secondly, make a list of all your debts. If you owe money on a credit card make sure you switch to one with zero percent on balance transfers so that you are paying off the balance, not just the interest. Using the figures from your budget, calculate how long it will take you to pay the amount off in full using your disposable income. 

 

If you have personal loans, look at the paperwork to find the date when the company expects the loan to be paid off and if there are any early repayment fees. Set up a direct debit so you are not tempted to miss payments and pay more than expected if you can. 

 

Check that you are getting everything you are entitled to by finding out what benefits are available in your circumstances. Many older people do not wish to rely on the state, but you may be able to claim benefits such as pension credit, or help with your rent, fuel and council tax, which will free up more income to pay off your debts. 

 

You may be eligible to remove a lump sum of money from your pension before retirement, though all pension pots should ideally be left alone. Many people often underestimate how long their retirement may last.

 

If there is no way you can pay your debts off before retirement or you are already struggling to meet your current repayments, contact a debt charity who will not only be able to help you budget and will also be able to offer advice on any debt solutions available. 

 

Our helpline advisers are available to discuss in confidence any aspect of debt. The freephone helpline is open Monday to Friday 8am to 6pm. Call on .