The new MagnifyMoney analysis of data from a study conducted by the University of Michigan Retirement Research Center Health and Retirement, indicates that a third of Americans over age 50 have a significant amount of non-mortgage debt that they are not able to resolve before retiring.
KSDK Five on Your Side reported in a recent story, “Older Americans are getting crushed by debt,” that the study—done annually since 1990—surveys more than 20,000 Americans age 50+ on their financial well-being. Those with debt, on average, have about $4,800 in credit card debt and $12,500 in total non-mortgage debt.
Carrying high-interest debt makes it easy to ruin the ability of older Americans to live a quality lifestyle in retirement. This only gets to be a more significant problem with the inevitable rising cost of their health care needs as they age.
Working with an elder law attorney at Cottrell & Jacobs, you can make the connection between debt and needing institutional care: the higher the debt load, the less likely the individual will have enough cash assets to cover medical care that’s not provided by Medicare.
According to research, 40% of all older Americans have credit card debt over $5,000, and 20% of Americans age 50+ have more than $10,000 in credit card debt. Typically, those individuals with more than $10,000 in credit card debt couldn’t pay off their debt with all the assets they have.
Here are a few thoughts on how to manage debt before you retire:
- Pay down your debt. If you have a lot of high interest credit card debt, pay that off before you put money into your 401(k).
- Cut the cord. Quit financially supporting your adult children and don’t take on more debt on your children’s behalf. Let them work on it the rest of their working lives.
- Downsize. Take action now to lower the costs of your housing and you’ll be able to make more room in your budget for your needs as you age.
- Work a little longer than planned. Don’t give up that paycheck so fast, and do whatever you can to pay off any credit card or other non-mortgage debt before you retire. This will give you more time to shrink any debt and the additional years of work will increase your Social Security benefit.
- Get help from a professional. An elder law attorney will be able to help you design a strategy to manage your debt to protect the quality of your retirement.
Reference: KSDK (St. Louis) Five on Your Side (August 23, 2017) “Older Americans are getting crushed by debt”