My 5 Best Hacks For Faster Debt Relief
Americans have big a problem.
They are swimming in debt.
Roughly half of all households have an IRA or 401(k).
But of those that do, the average account balance near those aged 65 is only around $135,000, according to a Sheboygan Press report.
And not only are we not saving enough, many retired Americans are also drowning in debt.
It’s easy to assume debt is a young person’s problem, but more and more senior citizens are finding themselves struggling with debt too.
In the last decade, the debt load for Americans aged 65 or older has skyrocketed by 83%, according to Federal Reserve.
The Employee Benefit Research Institute notes 50% of seniors over the age of 75 still have outstanding debt. This up 25% since 1992, as reported by CBS News San Diego.
The median debt level among seniors 75 and over is $20,900.
That may not seem like a lot, but most 75-plus seniors are living on fixed incomes and have limited options for paying down debt. Even worse, many seniors are using credit cards to make ends meet.
If you’re approaching retirement, you should make every effort to pay off your debt before you stop working.
Check the interest rates on each piece of debt that you have. This includes your mortgage, auto loans, credit cards, lines of credit, etc.
Then rank each loan from high to low by the interest rate you are charged.
Pick the most expensive debt (which will probably be credit card debt) and attack it. Make the minimum payment on all the rest of your loans but pay EXTRA on the most costly.
After you pay off your most costly debt, move on to the second most costly loan.
If have a large amount of debt, you should consider working, even in retirement. Not only will that help you pay off your debt, you may find work to be very fulfilling.
Many retirees develop great new friendships or are able to pursue passions, like woodworking or fitness by adding a little part-time work to their routine.
Five other great ways to pay down your debt include:
Join the Sharing Economy: The sharing economy is not only for millennials.
I frequently use Uber when I travel and I am no longer surprised when the person that picks me up is a retiree. And according to a New York Times report, 25% of Uber drivers are over 50 years of age and many over 65.
Also, an increasing number of empty nest senior citizens are using their spare bedrooms help make ends meet. AirBnB reported that its senior citizens hosts pulled in $150 million in rent in 2017, according to the Naples Herald.
Sell Assets: Do you really need an expensive automobile, boat or recreational vehicle? Clean out your storage areas and hold a garage sale. Use the proceeds to pay off any debt you can.
Downsize Your Home: There are lots of emotional connections to a home, but downsizing into a smaller house can release tens or thousands of dollars in equity. It will also lower your monthly overhead with lower utility bills and insurance premiums.
Consider a Reverse Mortgage: A reverse mortgage allows seniors 62 and older to borrow against the equity in their home. However, instead of taking a lump sum amount of money from the bank, borrowers receive the money from the bank in monthly installments. The money goes back to the bank when the home sells, or the borrower dies.
Make Your Money Work Harder: Durable income, focusing on a combination of larger companies with strong fundamentals that pay juicy dividends, REITs and Master Limited Partnerships (MLPs) are great ways to earn extra money to help pay down debt.
The bottom line: When it comes to paying down your debt, there’s a number of ways to do it.
But the most important thing to remember is do it now, before you retire.
Or it could be too late.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch