13 Ways to Get out of Debt When You’re Retired

You’ve finally reached retirement age and can’t wait to call it quits. But wait, you’ve got debts to pay off.

Debt can quickly eat up any extra money you have each month and that’s no way to live out your golden years. So what do you do? Easy, you make a plan to pay down your debt. Failing to do so can result in more interest and less money in your pocket, and nobody wants that.

We’ve curated a list of the most common ways financial experts recommend to handle these obligations while in retirement. Hopefully, one or more work for you.

1. Consider Home Equity Loan

This is not something you should take on without a lot of consideration and weighing the pros and cons, but there are some upsides to using a home equity loan to pay off your debt.

For one, instead of having variable interest rates, you’ll have a stable one. You’ll also only have a single payment instead of multiple. On the downside, you will essentially have a double mortgage, if you currently have one. Make sure you’re not taking on more and only borrow what you need to pay off the debt.

2. Downsize

Downsizing is the process of living more minimally. It could mean moving to a new (smaller) house or into an apartment or condo.

This is likely easier said than done, but when you downsize, believe it or not, you save a bit of money. In the interim, while you’re paying down debt, you won’t realize the gain, but once the debt is gone, you will, and you’ll enjoy the financial freedom that comes with it.

3. Take on a Part-Time Job

This is likely your easiest bet if you’re low on funds. The good news is you can find part-time work nearly anywhere.

There are likely retail jobs in your area, or if you don’t want to leave your home, there’s online work you can do, as well. Freelance writing, social media, and design work are just a few options.

4. Work With a Professional

If you’re truly lost, you might want to seek out the help of a financial expert. They can help you navigate your way out of debt.

They will take a look at your income and your debts and help you craft a plan. Make sure you do your research before you hire someone. The expert you choose should have the appropriate credentials, such as certification as a financial planner.

5. Cut off All Debt

One step you must take to get yourself out of debt is to stop creating more debt. That means stop using your credit cards and don’t take out any additional loans if you have them, (unless you’re consolidating).

You won’t get out of the hole if you keep digging it deeper.

6. Avoid Making Bigger Mistakes

Sometimes, in the panic of being in debt, people make mistakes landing them in deeper debt. Think payday loans, or taking drastic measures to try to create income.

Do not fall for any “get-rich-quick” schemes. If an opportunity sounds too good to be true, it very likely is and that will cause more headaches than simply being in debt.

7. Use Retirement Funds

If you have enough built up in your retirement fund, you might be able to use it to pay off your debt. The idea in doing this though, is that you’ll have another way to make up the money.

For example, you use some of your fund to pay off your debt and avoid astronomical interest charges, but you plan to work at least part-time until you’ve made up the difference. It’ll take time to make the money back, but at least you won’t be incurring interest and digging the hole deeper in the meantime.

8. Consider Balance Transfer

If your debt is solely on credit cards, you might be able to buy yourself time by opening a new 0% interest balance transfer card. That will allow you to reduce or totally eliminate interest while you’re paying down the balance.

Be aware, though, that this is just a quick fix and you need to have a plan to pay off the balance before the 0% transfer period expires.

9. File for Bankruptcy

Nobody wants to file for bankruptcy, but when you’re deep in the hole, sometimes, it’s the only way. The good thing about filing is that you get to choose which debt to include.

Filing bankruptcy does take time and it goes through the courts, but the good news is that your retirement funds and Social Security are protected assets, so your creditors cannot come after them.

10. Create a Payoff Plan

No matter what age, when it comes to paying off debts, it’s important to have a plan, especially during retirement. If you’re not working, chances are you’re now living on a fixed income—whether it’s one you set or due to your circumstances.

Crunch your numbers, see what you have left after your necessary expenses are paid, and tailor a plan to crack down on what you owe.

11. Relocate

For some, relocating is the best way to cut down on expenses and improve your quality of life. For example, living in California, Florida, or New York can be quite costly.

Moving to a different state—or sometimes, even just a different part of a state—can result in saving hundreds of dollars per month. Just make sure any areas you entertain have the resources you’ll need access to now or in the coming years.

12. Wait on Taking Out Social Security

If you’re heading toward retirement, but not quite there just yet, try to wait to start collecting Social Security. It’s available at a reduced rate at age 62 and fully vested at age 67, but if you wait a few years, you could get even more money from it.

In the interim, you can continue to work, which will allow you to pay down debts faster. In the end, you’ll likely be better off. You’ll be debt-free and have more money.

13. Use a Reverse Mortgage

This move isn’t for everyone and it’s actually quite a bit controversial, but we mention it because it is an option. And, it’s only available if you’re 62 or older.

With a reverse mortgage, you use the equity in your home, but over time, your mortgage payment goes up instead of down. Payments aren’t due until you either sell the house, move, or pass away.