How to deal with debt in retirement

The day you retire is the day you walk out of where you work for the last time and say to yourself “job done” – the smile on your face will barely fit through the door! All you have to do now is find a way to spend your time that involves only doing the things that you want to do all day. Should be simple enough. Perhaps you’ll start by learning to bake bread. Maybe after that you’ll get down to some serious reading. Then, the garden might need some work. But there could be something you’re avoiding – debt. 

First of all, if you are a veteran, you could already be entitled to support that you are not yet claiming. Depending on your circumstances, the level of support that you could reasonably expect to receive could vary – find out the current VA disability rates. Now, let’s take a closer look at how you could deal with debt in retirement, so that you can work towards finally closing the book on monthly payments. 

Prioritise your outgoings 

Some bills prioritise themselves, because without them, you wouldn’t have anywhere to live. This would include mortgage payments or rent payments (and any arrears), as well as energy bills, for example. But they are unlikely to be the reason you’re in debt. The reason for your debt is likely to be credit card bills and bank loans. By going through the various terms of your agreements and by noting down the interest rates, you can begin to formulate a list starting with the highest interest rates and progressing steadily to the lowest interest rates. 

The aim is to continue to pay the minimum monthly repayment on the lowest interest rates, and pay more towards the higher interest rate credit cards and loans – paying these off faster will save you money in the long term. 

Cut back on all expenses wherever possible

If your retirement has resulted in a lower monthly income, the fact of the matter is that your monthly outgoings must come down to meet your new circumstances. How can you do this? You need to be brutally honest over your expenditure, realising what is strictly necessary and what is an extravagance that you can live without. 

For example, your energy bill. If you don’t need heating and lighting anywhere near as much as your bills would suggest, cut them out as much as possible – we’re not suggesting that you should live in a sleeping bag in your own home and spend your evenings reading by candlelight, but you could reasonably cut down on your energy bills by being sensible with heating and light.

If you really need to tackle debt, you could look at downsizing 

People don’t like to leave their family home – and for good reason. This is where your children took their first steps. This is where the good times and the bad have been shared over decades. This is where the heart is. However, if your home is sizable, downsizing to a smaller property could free up valuable funds that could see you handsomely out of debt and into positive figures.