Retirement is meant to be filled with days of enjoyment. Whether that means spending time with grandchildren, enjoying the sun soaked beaches, fishing, or playing golf. It is not supposed to be riddled with overwhelming debt payments leaving seniors wondering how they will make it through each month.
For too many seniors the latter is their reality. Much of these circumstances are due to increased housing costs as a percentage of income. Instead of having the home paid off, millions of seniors are maintaining mortgage payments, even as their income is dropping. According to The National Council on Aging, over 23 million seniors are living below the federal poverty level ¹. In this same report, the Social Security Administration documents that nearly 75% of those who are 65 or older rely on social security for all or most of their income ².
When housing costs are more than 30% of income, it is considered to be unsustainable debt. According to AARP, 59% of renters and 33% of homeowners, who are seniors, spend over 30% of their income on housing ³. The result is millions who rely on home equity lines or credit cards to pay for basic living expenses. If health declines or an unexpected expense occurs, seniors might find themselves at risk of losing their homes.
Impact of the Housing Crisis
The housing crisis complicated matters due to the sharp decline in home values across the country. Many seniors found themselves upside down on their homes (no equity), at a time when their incomes were s also falling. The elderly have been particularly hurt by the economic crisis that began in 2008. While the recession is officially over, many seniors were laid off in the years just before retirement, leaving them with shortages in their retirement accounts. They also saw portfolio balances fall with little or no time to recover from those losses.
Now seniors are faced with the long term effects of the recession and many may never recover financially.
What to Do If You Are Suffering From Too Much Debt
Get Help Early. Struggling to pay bills now will result in a larger crisis down the road. Seeking professional help early will leave you with more alternatives. Waiting for a foreclosure notice or a court date, will limit options significantly.
Downsize. If you can qualify for a new home loan, consider selling the existing home and moving into a smaller residence. This can reduce monthly housing costs and enable you to stay in your home longer.
Move in With Family. Multi-generational living arrangements are becoming more common as seniors are living with adult children. This can be a very beneficial arrangement for both parties if handled correctly.
Re-enter The Workforce. For many healthy seniors re-entering the workforce, even on a part time basis, is required to make ends meet. New technology has provided many work at home options that seniors can take advantage of.
Assess Where Debt Is. Secured debt may be reduced by trading in your car for a less expensive model or considering a reverse mortgage. High levels of unsecured debt like credit cards or medical bills can be addressed through credit counseling or debt negotiation options such as a credit card modification program. When monthly payments are reduced, you may find yourself better able to manage your finances from month to month.
Seniors with high debt levels are not alone. Struggling in silence is not good for your finances or your health. Seeking free assistance from reputable companies like Strategic Consulting can provide the monthly relief you are looking for.