Handling Debt in Retirement
According to a recent report from the Federal Reserve, total household debt is rising quickly. The Fed found that debt levels jumped by $333 billion in the fourth quarter of 2021, the largest increase since 2007. And while that’s discouraging, the Fed also noted that debt levels among households where the head of family is 55 or older are also on the rise. For those households, it’s not a good sign for retirement. If you’re nearing retirement or already retired and carrying debt, here are some ways to handle it.
Many people retire and think that their expenses will decrease. And they do in some areas. But expenses rise in others. It’s important to not add to your debt. Take stock of what you’re spending and see where your money is going. The first step to climbing out of debt is to not add more.
Rank The Debt
Not all debt is the same. Mortgage debt can be handled more easily than credit card debt or medical expense debt. Go through your debts and make a plan to tackle the high-interest versions first.
Consider a Card
If you have a lot of credit card debt, consider using a balance transfer card. As CNBC notes, look for a card that offers a low or zero percent interest rate introductory offer. Then you can transfer your debts onto that card and pay it down without getting hammered by interest.
If you own a home, it might be a good idea to downsize. A smaller home comes with less maintenance costs, lower utility bills and more. You can use the money you’re saving to pay down debts. No matter how you decide to handle your debt, the key is to get started sooner, rather than later.
Source: Savvy Money