Being ready to retire is more than simply being ready to stop working. Most will experience a drop in income once that last pay cheque has been spent and debt repayments are one thing that can seriously put a strain on your savings.
If you can, paying down debt before you retire means more disposable income for the things you want and need, as well as peace of mind. However, it’s never too late, so why not check these 5 ways to pay off existing debt in retirement.
Boost your income
According to figures from the Office of National Statistics, in November 2020 the number of people in employment aged 65 years and over had increased by a staggering 66,000 on the quarter to 1.32 million.
However, if working full or part-time isn’t for you, there are other ways. Check you are claiming everything you are entitled to, such as pension credits. You could look to sell unwanted goods in your home. If you have the space, perhaps taking on a lodger or renting out a room for storage might fit in around your circumstances and bring in some extra cash.
Cut back and prioritise
Not all debts are the same. Start by writing down a list of everything you owe and prioritise how to pay it back - picking the debt with the highest rate of interest first.
If possible, look to transfer any balances to 0% deals - but make sure you pay it all by the end of the term or else the interest may rocket.
Look in your budget for where you could cut back - switch energy supplier, insurance company or phone provider to ensure you’re on the cheapest rate. Any savings you make can be used to pay down your debt.
If you’re a homeowner, one option could be to downsize to a cheaper property, raising the funds to pay off your debt.
This is really one to consider carefully, as the costs of downsizing can also be considerable, so ensure you take into account estate agents fees, stamp duty, legal costs, removal services and any work that needs to be done to your new property.
This option will obviously depend on your personal circumstances, as well as how much you owe.
Release equity from your home
An alternative to downsizing, with a lifetime mortgage, the most popular form of equity release, you could unlock some of the value of your home in tax-free cash to use to pay off existing debt without having to sell up and move. There are typically no monthly repayments with this type of plan, as the loan plus roll-up interest is repaid when the plan comes to an end.
Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. Therefore you must always seek advice from a specialist equity release adviser such as Key.
A Key Equity Release adviser will discuss your options with you and if equity release isn’t right for you, they’ll tell you.
Key Equity Release offer lifetime mortgages only, which is a loan secured against your home. You must always think carefully before securing a loan against your home.
Find out more by downloading our free guide to equity release here
If your debts are keeping you up at night and you feel like you cannot manage, there are a number of debt charities or professional bodies that may be able to offer advice for free, such as StepChange or Citizens Advice.