A recent report from the AARP revealed that, in the United States, people who are 50 years of age or older carried more debt than those who are 50 or younger. People over 50 have an average balance that is about $2,000 higher than the younger people, raising concerns about spending, debt, and retirement.
The debt that these older Americans are carrying is often for good cause. Many said that they struggle with debt from medical expenses, while others chose to help out relatives who were in financial distress. Still, these good intentions don’t make the road back from debt any easier.
One big advantage that younger people facing large debts like student loans or mortgages have is time. Having time on one’s side to pay off debts slowly while saving for retirement makes this financial situation more manageable, even if funds are tight at the moment. However, for older people who are nearing retirement and in debt, they can wind up in a much more precarious position as the need to continue to make credit card or house payments can undermine decades of savings. It is particularly difficult for older people who are no longer working and already living off of a fixed income.
In these situations it can be very helpful to review the other options available to borrowers who are unable to continue to make payments, including loan modifications, foreclosure, short sale, or personal bankruptcy. Each of these has its own advantages and disadvantages, but ultimately the best plan will likely the one that preserves assets that can help maintain a secure retirement.
Source: New York Times, “For Older Americans, A Deepening Debt Problem,” Carmen Wong Ulrich, March 26, 2013.
Information about discharge of debts in bankruptcy is available on our website.