December 9, 2019
A remarkable survey completed by the National Council on Aging (NCOA) shows a troubling trend for retirees’ finances. According to their study, there has been a nearly 45% increase from 1992 to 2016 in the number of households in debt which are headed by an adult age 65 and older. In 1992, the percentage was 41.5% and jumped to 60% in 2016.
And a survey from Ameriprise Financial Services found that 45% of baby boomers now think that carrying debt in retirement is okay- whereas only 37% of millennials and 40% of gen Xers agree with that sentiment. This debt burden is complicating retirement plans for many seniors in this scenario.
Responding To Debt Later In Life
Brent Weiss from Facet Wealth, a financial planning firm, described the tricky situation a 62 year old woman he worked with had found herself in. She was planning for her retirement in three years, but in their meeting she shared that she still had a $100,000 mortgage- and $150,000 in credit card and student loan debt which she had taken out for her daughter’s education.
“It was a tricky thing to discuss, that maybe she didn’t save enough for retirement,” Weiss shared. Ultimately, he recommended that she refinance her mortgage, pay down the credit cards and loan, and plan on working another five years.
Social Security Can Help Ease Debt Too – Especially If You Wait
Waiting to retire at your full retirement age has another benefit as well. “Delaying when you start taking Social Security is one way to boost income in retirement and ease the burden of debt payments. If they wait until age 70, they could get 130% of their benefits.” Colin Slabach, an assistant professor at The American College of Financial Services, explained.
Another way to reduce expenses in retirement and pay off debts is to explore a life settlement if you own a life insurance policy. Not only does a life settlement free up a retiree’s money that would otherwise paid to insurance companies in premium fees, but an investor also pays a lump sum cash payment to the policy seller in exchange for the eventual death benefit! A life settlement is regulated at the state level, so be sure to speak with a life settlement broker or provider that is licensed in your state.