What Happens If You Retire with Debts?

What Happens If You Retire with Debts?


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What Happens If You Retire with Debts?For many people, retirement means living on a fixed income that comes from Social Security or a pension. Unfortunately, this is almost always significantly less than the income you made when you were working full-time. What happens if you retire with debts? Your income may be less, but your debts may remain the same, which can lead to a few missed payments. If you aren’t debt free when you retire, you could experience some financial stress and calls from debt collectors.

What Happens If You Retire with Debts?

Your Social Security and pension cannot be garnished as a paycheck can. However, debt collectors may request a bank levy from the courts. That would allow them to take funds directly out of your bank account. A debt collector probably won’t go this route, depending on the size of the debt, because of the long and costly process. Should a creditor levy your bank account, however, it’s in your best interests to connect with a local attorney.

According to the Motley Fool, “We tend to think of debt as a younger person’s problem, but in reality, it impacts seniors to an unhealthy degree. An estimated 30% of seniors 65 and over still have a mortgage, and as of 2015, 2.8 million seniors aged 60 and older were on the hook for student debt.”

What Happens If You Retire with Debts?

When you carry debt into retirement, you not only lower your chances of ever paying the debt off but you also risk struggling financially when your debt payments monopolize too much of your limited income.”

So, if you’re about to retire and haven’t managed to pay off your various obligations, here are some tactics that will help you cope:

  1. Pay your costliest and least beneficial debts first. Credit cards carry the highest interest rate, and the interest is not tax deductible. Pay these cards off and then attack student loan debt or mortgage.
  2. Get a Job. If you’re entering retirement with debt and don’t want those monthly payments eating up too much of your income, getting a part-time gig to generate extra cash could be just the trick.
  3. Sell other assets. For example, if you own a larger home that’s not paid off, you might refer to a recent blog post: 5 Downsizing Myths in Pittsburgh. Downsizing could serve the dual purpose of eliminating your mortgage and giving you a sum of cash to apply to other debts you might have.

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