Home > Finance and Pensions > Avoiding Serious Debt During Retirement

Avoiding Serious Debt During Retirement

By: Garry Crystal - Updated: 8 Apr 2011 | comments*Discuss
Retirement Debt Free Debts Downsizing

Millions of people in the UK will reach retirement age without adequate pension funds. For many, debt may seem like the only option but there are ways to avoid drowning in debt during retirement.

Retirement Debt Figures in the UK

The statistics on retirement debt in the UK do not make light reading. According to a retirement report undertaken by Aviva, one of the UK’s largest insurers, one in five senior citizens survive on only £750 per month. A Scottish Widows report also states that 15% of people enter retirement still paying off their mortgages, with the average debt standing at around £50,000. A large number of retirees do enter retirement debt free with their mortgages cleared. But for those surviving on a low income, the temptation to use the easily available debt routes is hard to resist.

Debt Solutions before Retirement

Many people approaching retirement age will decide that working for a few more years makes financial sense. Working only five years past the state retirement age and deferring a pension can mean an increase of 50% per week to a weekly pension. For some people, working past retirement age is the only option in order to top up pensions and help pay off debts. A pension plan is one of the most important sources of income during retirement and should not be underestimated. Unfortunately, too many people leave it far too late before deciding to take their occupational pension plan seriously.

Clearing off Retirement Debt

For those who reach retirement age with a fair amount of credit card and loan debt it is important to eliminate these debts. Credit cards and loans will simply mean interest repayments that eat into any retirement budget. These debts should be cleared as early as possible, before retirement if possible. But if this is not possible then consider using part of the pension lump sum payment to clear these debts. This may seem like a tough financial pill to swallow but it will save money in the long run. Transferring debts to zero interest credit cards and repaying them without spending can also save money in interest payments.

Working Part-Time During Retirement

If the thought of full-time work when retirement age hits is too much, then consider part-time employment. Many people approaching retirement find part-time work financially sensible and it also helps with the retirement transition. This could be part-time work with an existing employer or in a completely new employment direction. Part-time work alone can help to clear off debts or bring additional retirement savings. There are many employers who look for older workers to take part-time work as many value the older worker’s experience and reliability.

Consider Downsizing during Retirement

Downsizing is finding the right fit for present circumstances. There are many retirees who own large homes but do not take the plunge to move because they have lived in the home for many years. Downsizing to a smaller home has benefits for either renters or home owners. Moving to a smaller property can mean a decrease in bills. A home owner can sell, have nice amount of money and can still buy a smaller property outright.

Look at Ways to Increase Income during Retirement

There are ways to increase income during retirement without actually working. Consider renting out a room if there are spare rooms in the home. This can bring in as much as £4250 per year, and this amount is tax free. Looking at ways to economise with the household budget can free up some disposable income. Ways to save money and increase income can include:

  • Switch energy and service providers if a less expensive one can be found
  • Decrease energy bills by insulating the home; there are grants available for this
  • Take advantage of the many discounts available for retirees on holidays, services, leisure and entertainment
  • Assess all investments and view whether money can be invested elsewhere at a better rate
  • Those with credit debts and savings should consider using savings to clear debts and eliminate interest payments
  • Consider selling a car if it remains largely unused; the annual cost of maintaining a car is expensive

A debt free retirement is not an option for a great many people. But planning ahead and looking for viable ways to increase income during retirement should help to decrease debts. Retirees should also remember to talk to a benefits advisor in order to claim all financial benefits they are entitled to. This can help to top up a pension and there are many senior citizens in the UK who are not claiming their rightful benefits.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

(never shown)
(never shown)
(never shown)
(never shown)
Enter word:
Latest Comments
  • Judith
    Re: Clubs to Join in Retirement
    Are there any activities or groups currently taking place in Wakefield for over 60’s. I am a social person missing human company.
    7 October 2020
  • Brenda
    Re: Clubs to Join in Retirement
    Very young 75 year old looking for friends for days out and meals etc. In my area. I am a twin she is also on her own. Young at…
    7 October 2020
  • Fancy
    Re: Clubs to Join in Retirement
    Widowed over 2 half years but nice to socialise again
    29 September 2020
  • Wendy
    Re: Clubs to Join in Retirement
    I'm 63 and still working but love walking, swimming & days out. I drive & am happy to travel. I'd love to have a friend to walk or…
    23 September 2020
  • hillmill
    Re: Clubs to Join in Retirement
    Hi, I recently lost my husband and I am looking for companions that would like to meet up and maybe do day trips and coffee meet…
    21 September 2020
  • Jeanne
    Re: Clubs to Join in Retirement
    I have recently moved to Long Buckby Northamptonshire living with my Son and family, I would love to have female friend to chat to…
    16 September 2020
  • Shylady
    Re: Clubs to Join in Retirement
    I am a young 71 year old and lost my husband last year am looking for someone who has the same interests and would enjoy my…
    14 September 2020
  • Dolly
    Re: Clubs to Join in Retirement
    I am a 68 year old lady I have just lost my beloved husband due to the virus he was 71 and in good health so it was very sudden I…
    13 September 2020
  • Weebilly1
    Re: Travel Concessions for Over 60s
    I'm am on my pension I'm 67 years old and can i get a train ticket for a year
    12 September 2020
  • Trish
    Re: Clubs to Join in Retirement
    I am a young at heart 81 year old, lives in Paignton and wonder whether there is anyone out there who would like some occasional…
    11 September 2020