How to pay off debt in retirement

Older Americans, especially those in retirement, should be able to live a good life after decades in the workforce. But are they enjoying life too much? If excessive credit card usage is any barometer, the answer may be an unqualified “yes.”

According to data from the New York Federal Reserve, Americans between the ages of 50 and 70 account for $376 billion in credit card debt. Compare that to younger Americans between the ages of 30 and 50 who have a combined credit card debt total of $348 billion. The New York Fed estimates total household debt for U.S. seniors has risen by 543% over the past two decades. So, how do you pay off debt in retirement? There are some simple options.

How can senior citizens get out of debt?

The trick in circling back and paying off high credit card debt in one’s golden years is to recognize the problem, confront it, and start taking the steps necessary to not only cover existing credit card debt but also to stop overusing plastic.

Seniors (and those in retirement) can take these steps to overcome their burgeoning credit card debt:

• Acknowledge their credit card debt
• Lock away credit cards
• Open a balance transfer credit card

Acknowledge their credit card debt: Often, people do not realize a credit card debt issue is getting out of hand.

“If a senior is only paying minimums or has multiple credit cards with debt balances, there’s likely a problem,” said Ashley Morgan, a debt and bankruptcy attorney at Virginia-based Ashley F. Morgan Law. “Thus, breaking down the debt and getting the full picture is necessary.”

Getting all credit card statements together and aggregating the balances and payments can help illustrate the bigger issue. “Going over all the statements together can also help bring to light the actual spending patterns,” Morgan said. “It’s easy to not realize your total debt has increased when smaller increases are appearing on multiple cards.”

Lock away credit cards: Locking away credit cards, except for true emergencies, can also be helpful for seniors dealing with major credit card debt.

“Many people view credit cards as security blankets,” Morgan said. “Some are fine with using them regularly and some are not. If the senior is not someone who can use a credit card and keep in budget, then having a close trusted friend or family hold on to the card can be helpful. This way, the card is available if necessary, but it’s no longer something that is always tempting.”

Open a balance transfer credit card: After a senior cardholder gets a grip on tighter credit card spending habits, it’s a good idea to buy some time with a zero balance transfer credit card.

“A zero balance card with a long 0% interest rate period is a good move,” said Kliment Dukovski, credit cards specialist at Finder.com. Some zero balance credit cards offer 20 months of an interest-free period, which is enough to provide some much-needed breathing room for seniors dealing with credit card issues.

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How to help seniors with credit card debt

In many cases, an adult son or daughter, or another family member, may need to intercede with a senior parent or grandparent with credit card troubles. In just as many cases, a senior parent or grandparent may not appreciate the help and may not want to engage with a younger family member to solve the credit card debt problem.

“Sometimes it can be difficult to get through if a parent or grandparent is older and has diminished mental capacity,” said Anthony Wentzell, a fiduciary investment advisor and Plan & Act in Windermere, Fla. “Other times, they may not want help, or recognize that there is a problem.”

“If the credit card problem is a serious and destructive habit, then it may be time to ask the senior to add a son or daughter, or even a grandchild, as a financial power of attorney,” Wentzell said. “This gives the child or grandchild the ability to sign and act on behalf of their parent or grandparent.”

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Credit cards and fixed incomes may be a toxic brew

It’s true that a large segment of the U.S. population has paid off their mortgages and their kids are out of college, meaning they have more disposable income on hand.

That said, money managers historically note that older Americans, particularly those on fixed incomes, need to be tighter with household spending than younger financial consumers who are still earning income and have years to go before they slow their household spending.

“Seniors are susceptible to consumer debt and more specifically credit card debt because they are on a fixed income,” said Adem Selita, chief executive officer at The Debt Relief Company in New York City. “Most seniors rely on Social Security or pension income, so an unexpected expense like a medical bill or a major car repair issue can completely throw their entire budget out of whack.”

Credit card debt is a particular concern because credit card debt is only meant to be a short term and revolving lending vehicle. “Credit card average percentage rates (APRs) are extremely high and if you don’t pay your balance off at the end of the month (which may be hard to do on a fixed income) a vicious cycle of revolving debt can result,” Selita said.

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