Managing Debt in Retirement: Strategies for Senior Citizens

Managing Debt in Retirement: Strategies for Senior Citizens

Retiring debt-free used to be an implied perk of the American dream, but in today’s economy and retirement crisis, it’s unfortunately no longer a given. If you’re about to enter retirement with lingering debts, there are several strategies that may help you jump the hurdle. 

Key Takeaways

  • 61% of households headed by a senior citizen are in debt.
  • The most common types of debt held by seniors are credit card debt, medical debt, mortgage debt, and personal loan debt.
  • Unmanaged debt in retirement may diminish your quality of life, cause you to forgo necessities, place you at higher risk when it comes to financial fraud, and/or damage your credit score.
  • To manage debt in retirement, prioritize debt repayment, consolidate your debts, try negotiating with creditors, seek financial counseling, and/or dip (responsibly) into your retirement savings.

Debt in Retirement

What Are the Most Common Types of Debt Held by Seniors

Credit Card

Credit Card Debt


Medical Debt


Mortgage Debt

Personal Loan

Personal Loan Debt

In the race towards a happy, healthy retirement, it’s often heavily advised that seniors pay off any outstanding debts. Debt in retirement could refer to any type of funds owed: credit card debt, mortgage debt, medical debt, or debt from a personal loan of any kind (with medical and credit card bills taking the cake for most common types of debt for seniors). 

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Q: What do you wish more people knew about managing debt in retirement?

A: Having a plan makes all the difference.

Jeremiah J. Lee, J.D., CFP Chief Financial Officer at TriCord Advisors

61% of households headed by a senior are in some kind of debt, with an average debt amount of $108,193

61% of households headed by a senior citizen are in some kind of debt, with an average debt amount of $108,192.92. Not only does this staggering average debt place families in financial hot water, it’s also bad for seniors’ health. Those in debt are more likely to have ever suffered from two or more serious illnesses, and the steep cost of healthcare only creates a more vicious cycle.

If you, a family member, or the head of your household is about to enter retirement with outstanding debts, it’s crucial to educate yourself on strategies for managing debt at this point in your/their career.


Q: What are the most common financial missteps you see when working with people who are preparing for retirement?

A: People just winging it, and not having a plan or an emergency fund.

Jeremiah J. Lee, J.D., CFP Chief Financial Officer at TriCord Advisors

Types of Commonly Held Debt by Senior Citizens

There are a variety of types of debt that commonly plague seniors. Below are some of the most common debt types for Americans over 65.

Credit Card Debt

41% of households headed by a senior citizen carry credit card debt. With inflation, the rising cost of living, and the price of necessities often outweighing monthly income, it’s unfortunately easy to incur a steep credit card bill. The average credit card bill for a member of the senior age group has recently skyrocketed, with the average balance nearly tripling since 1989.

Mortgage Debt

Nearly 10 million American homeowners still paying off their mortgages are over 65. These older adults in mortgage debt constitute 29.2% of all older adult households, and they owe an average of $68,500. While older homeowners tend to own older homes with monthly bills that are less staggering than the national average, mortgage bills can still be detrimental in retirement. 

Medical Debt

Medical debt is another major obstacle to a debt-free retirement, especially since seniors are at higher risk for certain health conditions. According to the U.S. Census, 15% of householders aged 65 to 69, 11% of householders aged 70-74, and 9% of householders aged 75 and over were in some kind of medical debt as of 2018. 

This means that in that same year alone, 4.5 million Americans over 65 faced medical debt, and many of their households underwent significant financial hardship as a result. 

Although senior citizens are eligible for coverage through Medicare (65 million are enrolled as of last year), Medicare unfortunately does not cover many common needs associated with aging, such as hearing, vision, and dental care, which forces many seniors to pay out-of-pocket for certain doctor’s appointments and contributes to medical debt.

Personal Loan Debt

Another major contributor to debt for senior citizens are personal loans. This might include student loans from higher education, a child’s education, or returning to school later in life (9.6% of families headed by someone aged 50+ carry student loan debt often for upwards of $30,000). 

This might also include auto loans. Over the past three decades, there’s been a spike in the percentage of seniors taking out loans to pay for a vehicle as well as the amount (adjusted for inflation) that the average senior takes out. 

Personal loan debt also encompasses a myriad of other types of loans, such as home renovation loans, travel loans, pension loans, marriage loans, and more. Seniors living in Washington, D.C., California, and Hawaii are most likely to be in debt in general, while seniors living in West Virginia are least likely to be in debt.

Consequences of Unmanaged Debt in Retirement

For those wondering when it’s time to retire, there are a few important things to think about. Rick Orford, a published author and expert in personal finance, says, “it’s essential to consider whether social security and any guaranteed pension will cover the payments.” 

He elaborates, “if a retiree is reliant on a private pension or their own investments, debt is probably the worst thing a retiree can have because the investments can drop 30, 40, 50+%. If this happens, cash flow is at risk.”

The unfortunate consequences that come with unmanaged debt can have a serious impact on the quality of your retirement. Living with unmanaged debt might mean a reduced standard of living. 10.3% of American seniors live below the poverty line (and seniors were the only age group to see an increase in poverty from 2020 to 2021). 

Debt might also mean difficulty paying for essentials. Over 10 million households headed by seniors are cost-burdened, meaning over a third of their income goes towards paying for housing, and many of these houses forgo certain necessities like food or medical care to make ends meet. 

According to the National Council on Aging, senior citizens are also unfortunately at increased risk of financial fraud, as financial scams (i.e., government impersonation scams, sweepstakes and lottery scams, robocalls and phone scams, and more—even grandchild impersonation scams) targeting older adults are on the rise. 

In 2021 alone, 92,371 seniors reported falling victim to a financial scam, contributing to the vicious cycle of debt. 

Finally, unmanaged debt can have a detrimental impact on seniors’ credit score. About 30% of what factors into your credit score is outstanding debt, so while age is generally in your favor when it comes to credit score, debt can unfortunately cause a serious drop. 

Strategies for Managing Debt in Retirement

Prioritizing debt repayment is one of the best and most straightforward strategies for managing debt in retirement. Repayment plans are available to help you stay on track, and are completely successful about 45-50% of the time on average. 

You can budget and devise a plan yourself or seek help from a debt settlement company. 

Consolidating debt, a form of refinancing that involves taking out one loan to cover all existing debts, is another option. 

Debt consolidation loans range anywhere from $1,000 to $100,000, and some have interest rates as low as 6.74% (although some interest rates reach 35.99% depending on your credit score and whether you choose autopay). Personal loans like debt consolidation loans typically involve fees of 1%-5%

Negotiating with creditors (i.e., contacting your credit card company) is another effective option for managing debt. You may be able to explain your situation and negotiate for a payment plan or even lower interest rates (and if at first you don’t succeed, try calling again to increase your chances of success). 


Q: What advice do you have about debt consolidation for senior citizens?

A: Get things paid off before you retire, as there isn’t much flexibility after you retire. Ideally, you want to get a plan together 5 years before retirement.

Jeremiah J. Lee, J.D., CFP Chief Financial Officer at TriCord Advisors

Seeking financial counseling may also be helpful for managing your debt in retirement. Financial advisors are finding increasing success (with a projected 15% increase in employment for financial counselors in the next decade). 

Meeting with a professional may be the best investment to help you plan to manage your debt and any other financial obstacles to a happy retirement. 

Finally, dipping into your retirement savings to pay off debts (with caution) might be an option for you. 

While using your retirement funds before retirement begins comes with financial penalties, it may save you from hardship from compounding debts in the long run. (14% of adults aged 35-54 take loans from a retirement account, while 7% of those aged 55 and older do.)

Orford advises seniors to create a retirement budget before they retire. “Use the 50-30-20 rule,” he says, “aim to spend 50% of your income on essential expenses, 30% on non-essential expenses, and 20% on savings and debt repayment.” 


Q: What are some ways that you would encourage a senior citizen to downsize (be it car, home, day-to-day spending) in order to prevent debt in retirement?

A: Lifestyle is lifestyle, and big changes can be difficult. Some of the lower hanging fruit to think about might be hobbies that aren’t as enjoyable anymore, like having a bigger yard that requires more care, or restoring vehicles. It might be good to think about what isn’t adding real value, joy, or utility, and cut back there.

Jeremiah J. Lee, J.D., CFP Chief Financial Officer at TriCord Advisors


Addressing debt in retirement can feel burdensome and overwhelming. However, it’s crucial to tackle any outstanding debts in order to enjoy your retirement to its full potential (and to avoid harsh consequences like diminished quality of life, inability to afford essentials, impact from financial fraud, and damage to your credit score).

There are several strategies out there to help you manage debt, like prioritizing debt repayment, debt consolidation, negotiating with creditors, seeking financial counseling, and even dipping into your retirement savings. Across all older adults, about one in five seek help from a financial advisor when under financial stress. 

If you’re in debt and overwhelmed at the prospect of managing it as you retire, joining those 23% seeking professional help may be your best bet. 

Debt in retirement can certainly be a burden and an obstacle to the retirement you’ve dreamed about. But there’s hope. 

By following the aforementioned strategies to absolve yourself of debt in a responsible manner, you’ll be enjoying your retirement debt-free in no time.

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