Credit card debt is a serious challenge for a large group of Americans over age 50 that has a ripple effect on the quality of their retirement.
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, 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.
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