Imagine this scenario: Christopher is a 72-year-old retiree with multiple medical conditions that limit his mobility. He has no retirement savings, so heโs living off Social Security alone and supplementing this income with credit cards.
But now heโs racked up $77,000 in credit card debt and faces some hard choices.
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Christopher is stuck in a cycle where, after making his minimum credit card payments each month, he has little left over from his Social Security check. So, he then uses his credit cards to cover the gap.
One bright spot in Chistopherโs financial journey is that heโs paid off his house and has equity of about $350,000. He wants to leave the house to his adult children, but doesnโt know whether it makes more sense to sell his home to pay off the debt and downsize โ or to simply ignore the debt for his remaining years.
To figure out what’s best, let’s get into the numbers.
Nearly half of Americans 50+ carry credit card debt from month to month, along with 42% of Americans aged 65 to 74, according to a recent survey from AARP.
The survey also notes that about half of older adults who have credit card debt feel financially insecure. Of those in this group, more than half have credit card balances of $5,000 or more โ and nearly half say their balance has grown from the previous year.
So, why are Americans 50 and older carrying so much debt? In many cases, it has nothing to do with frivolous spending โ the top reasons include the cost of everyday expenses, as well as vehicle and housing costs. Many also report that health care has contributed to their debt.
Retirees do have some options for reducing debt, such as cutting back on expenses, using some of their savings or even working part-time. They could also consolidate their debt and perhaps negotiate a better rate, use the cash value of an insurance policy to pay off the debt, or even take out a reverse mortgage. It could be helpful for retirees who are in debt to chat with a financial advisor about their options.
In Christopherโs case, his expenses have already been cut as he spends most of his money on health care and paying back his credit card debt. And heโs in a cycle where not taking on new debt would mean skimping out on food or medical care.