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How to deal with debt in retirement

We know that living with debt in retirement can be distressing and stressful, but the key thing to remember is that you are not alone and your situation is solvable.

One in three people is expected to retire with an average debt of £17,460, with money owed on credit cards (48%), outstanding bank loans (31%) or outstanding mortgage (14%).1

If the thought of freeing yourself from the burden of debt by taking out a personal or secured loan or credit card seems overwhelming at this stage of your life, it's reassuring to know that there is another option available: Equity release.

In this article, we'll address the steps you can take to managing your financial situation and how equity release could be the answer.

Take ownership of your debt

Dealing with debt is a far better solution than ignoring it. That's why we recommend you take the following actions to address your money issues:

· Ask for help: Discussing your financial situation with family or friends is a positive sign that you are addressing your debt and seeking advice. If you'd like to speak to us in confidence about your personal situation, please feel free to get in touch at any time.

· Prioritise your debt: Not all debt is created equal. Some payments should be paid off before others (e.g. mortgage payments). Taking the time to prioritise your debts by importance can help you focus on what's most urgent.

· Create a budget: Pull together a list of your current incomings (such as state or private pensions) and outgoings so you have clear visibility of your monthly funds. These may change over time so it's good practice to regularly check and update your budget.

Considering equity release

If downsizing and moving out of your family home isn't the right choice for you, equity release could help repay credit commitments, clear your debt, and boost your retirement income.

Equity release lets you free up a portion of the value of your home without having to sell it. The money you receive will be tax-free, there are no monthly repayments, and, because you will still own your home, you will continue to benefit if house prices surge.

The Equity Release Council approves lenders, which safeguards you and your estate from owing more than what your home is worth when it is sold (known as the ‘no negative equity guarantee’) or leaving your family in debt.

So it’s no surprise that research has shown that an increasing number of people aged 65 and over are using equity release products to pay off debts and mortgages.2

To find out more about releasing funds from your home, including how to explore equity release with confidence, please read our myth-busting guide to equity release.

For independent financial advice on your financial situation, including a review of how much equity you could release tax-free, we’re happy to help. Call us today on 01473 603 211.

References

(1) https://www.pensionsage.com/pa/One-in-three-savers-to-retire-with-debt.php

(2) https://www.lv.com/about-us/press/large-increase-in-number-of-people-using-equity-release-to-pay-off-debts-and-mortgages

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