Tips for Senior Citizens in Managing Debt and Enjoy Your Retirement

The golden years – a time to relax, a time for recreation, freedom from labor, responsibilities, a time for a new self-discovery. The prospect of the early years of retirement may well be a welcome occasion for many. But in many instances, the golden years turn out to be anything but golden.

Money problems are one the most distressing issues for many senior citizens. The sudden drop of income and the limited money often brings financial crisis. Today, most senior citizens have at least one or two credit cards when they reach retirement and sometimes, managing and sustaining a credit card could easily be overlooked. The tendency to overspend with retirees is high, simply because they continue to spend like they did while they still worked. That’s when they realize that they have an over-balance that they cannot pay back.

With only their company pension and social security to live by, being trapped in debt becomes easy but paying off debt could be tricky. Indeed, there are some ways to deal with the situation so that many senior citizens could reduce their debt and enjoy their retirement years. Consider the following:

Reverse Mortgages.

Some retirees resort to making mortgage payments to get out from credit card debt. But this is not a good idea, since it only puts you to another and much deeper debt hole. A better option could be a reverse mortgage. Reverse mortgage converts your home equity to cash, and you will have the choice whether to receive the money in lump-sum, as a credit line or as a monthly allowance. There is no need to pay back for as long as the owner of the house resides there. Through a reverse mortgage a source of income is made available for the retiree for the rest of his life. It is provided however, that the property’s taxes and insurances are regularly paid and that the homeowner still lives in the house.

But of course, bear in mind that once a house has been applied for a reverse mortgage, it’s only as good as long as you live there. After that, the house will be left to the bank. If your heirs would like to keep the house, they would have to settle the loan for themselves and pay the equity back. Obviously, if you would like to leave the house to your children, this will not be a comfortable arrangement.

Life Insurance.

For those with a life-insurance policy, it may be a good choice to consider a cash-surrender loan. This converts the value of your policy to cash and will be given any time if you choose to cancel the policy. It would be like acquiring a life-insurance policy as an investment. When the policy holder dies, the insurance company will get back the loan balance with interest. The money from an insurance-policy has certainly more value for the senior while he is alive, since he can enjoy the most of it and live the last years comfortably. In death, this money will just be left to the beneficiaries, but then if the retiree isn’t careful he can leave their family buried in debts for their funeral arrangements. If such a loan is taken out, the retiree should make sure that arrangements had been made for any burial expenses.

Declare Bankruptcy.

Declaring bankruptcy to be absolved from debt would be a tough choice for seniors. The psychological impact of having an unpaid debt could cause great pains and anguish. Furthermore, filing for bankruptcy will not permanently solve debt problems. With a very limited income and large medical bills to pay for, the debt could soon stack up again.

Starting November 2005, filing for bankruptcy requires the debtor to undergo a six-month credit counseling program. Hence, it would better for seniors to seek help from a credit counselor who will recommend a debt-management program. Then again, it is important to make sure that the credit counseling agency they choose offers consumer education and counseling outside debt-management programs, to inform them about all other options they can do aside from debt-consolidation. The National Foundation for Credit Counseling has a list of these legitimate local agencies.

Forget Debt.

Some credit counselor would just advice you to simply ignore your creditors and not worry about it. In such situation, the creditors would sue the debtor, which means his property will be instantly sold after he dies. Nonetheless, you will not be kicked out of your property, and you are not the owner of the house, then your debt will simply be written off. It will not passed on to family members.

Many seniors would find this a most difficult thing to do. It would be a direct attack to their self-esteem and principles. Asking them to deliberately not pay their debt could be psychologically punishing. Yet, given the choice to declare bankruptcy and lose a home, or ignoring debt and staying in, it would be more reasonable to choose the latter.

Also, as a debtor, you must be aware of your rights. The Fair Debt Collection Act states that retirement income is exempted from creditors. This and other rights are listed at the Federal Trade Commission’s (FTC) Web Site.


The Kaiser Family Foundation reports that 40% of Medicare beneficiaries have less than $12,000 in their savings. Thus, it wouldn’t be wise to use your savings in paying off credit-card debt. These savings should be strictly allotted for your retirement. Since this would be your only source of income, it should only used to support you through out your retirement years, not in paying debt.

The above suggestions could just be a last resort if debt really becomes too difficult to handle. To avoid having to make such a choice to pay a large debt, it is still better to take precautionary measures which are actually much more simple if you think about it.

Plan Ahead.

Even before the day of retirement comes, it is advisable to have your savings. Investing in an insurance, stocks or real estate or having a time deposit account will give you a more solid support in addition to your pension.

Live Modestly.

There is a saying, “It is never this AND that, but this OR that”. After retirement, this saying maybe more applicable than ever before. Make a list of all the things that are really necessities and important in your daily life. This way, every thing you will spend on will be carefully thought of and planned. It would prevent unnecessary spending and you can be sure where your money goes to.

Be resourceful.

Being retired doesn’t mean you still can’t work. Use your resourcefulness to make extra money. It could be as simple as growing your own vegetables in the garden, or taking up a hobby and selling it on ebay. This does not only create an additional source of income but it also gives you something you can enjoy doing as well.

Watch your health.

Avoiding medical bills will save you from many financial troubles. After retirement, you maybe prone to a lot of physical inactivity and unhealthy eating habits. Remember that the body needs constant activity especially as we grow older. Maintaining a healthy diet and proper exercise would bring great benefits to your body. Also, having general physical check-up is recommended to assure that you’re still in top shape.

A young heart and spirit.

Along with physical fitness, mental, emotional and spiritual well-being is very, very important. Having a healthy attitude and mindset, being continuously interested and curious in new things will keep you vigorous and positive. Why not learn a new hobby? Doing service and being concerned about other people is also very gratifying. Being retired doesn’t mean you need to rest from all your activities. Instead, why not take a look at it in a different way. These years are the time where you are free to choose what you want to do and when to do it. Yes, find an activity that you enjoy and share it with other people. You’ll be surprised that it keeps your heart happy and your spirit so much younger.

Elizabeth Roberts

Elizabeth Roberts

Liz Roberts and her team are continuously providing information to people who are ready to repair their credit and improve their credit score. Also team strives to empower the homebased and small business owners by bringing information that can help them to manage and grow their businesses. Let our 24+ years of business finance experience help you to get the financing you need! CONTACT US if need financing for your business.

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