Table of Contents:
- Develop a Post-Retirement Budget
- Explore Programs for Seniors
- Adjust Your Lifestyle
- Consider a Life Settlement
As a senior preparing for retirement, it’s a good idea to plan ahead so you can avoid losing your financial footing. Without a steady paycheck, it can be hard to handle medical bills, housing costs, everyday expenses and existing debt. According to the Survey of Consumer Finances, debt among heads of households aged 65 and older reached an all-time high of 60 percent in 2016. Understandably, managing your finances can be one of the most stressful adjustments in the transition to retirement, so it’s important to think long-term when it comes to spending and saving.
Here are a few ways to manage debt and mitigate financial stress as an older adult:
Develop a Post-Retirement Budget
Your pre- and post-retirement budgets will most likely look completely different. It’s worth revisiting your financial strategy, especially when you have existing debts to tackle. Start by listing all essential expenses and measure that total against your income. Assess how your current debts factor into the equation, and how you plan to pay them off. Once you determine what is reasonable to spend against new income—debt payments included—you can safely commit to this new budget.
Explore Programs for Seniors
It’s also helpful to learn everything you can about programs such as Medicare and Social Security in order to fully understand their benefits and shortcomings, and how they’ll impact your finances. Medicare doesn’t cover everything, so you might have to supplement with another insurance plan or cover costs out of pocket. If you’re able to delay Social Security payments until age 67, you will get a significantly higher monthly benefit than you would if you begin at 66. Taking these factors into consideration when setting your budget and managing debt can be greatly beneficial.
Adjust Your Lifestyle
If you have a budget set but you’re still struggling to make ends meet, it might be time to downsize. Instead of gathering extra debt by letting credit cards pick up the slack, think about how you can adjust your lifestyle to match your new retirement income. On a large scale, consider eliminating an expense like a high car payment. If you drive infrequently, look into switching to public transportation. Or, if you own more than one vehicle, you could sell one and share the other(s) with family members. It may take a while to settle into this new lifestyle, but in the end, you’ll be in a better position to pay down outstanding debts.
Consider a Life Settlement
Another way to gain financial stability is to seek a life settlement. With a life settlement, you can sell all or part of your life insurance policy without taking the loss of surrendering it back to your insurance company. Until recently, life settlements had a negative connotation among seniors who could be made vulnerable to financial predators. But with laws enacted to protect seniors from potential risk, these types of transactions can provide many older adults with the extra funds needed for bills, everyday expenses and debt payments.
If you’re 65 or older and no longer need your term, whole or universal life insurance policy, you may be eligible to sell it in order to ease some financial stress. Be sure to discuss your debt management plan with your financial advisor or accountant, who can help you get a clearer picture of your fiscal situation. A life settlement may be the right option to help you settle into your retirement comfortably and confidently.