Debt may blight retirement for half of over 55s

Almost half of all people over the age of 55 are struggling to deal with their debts before retirement. On average they owe £4,400, but a significant 13% of people owe more than £10,000. Alarmingly 7% say they will have to delay their retirement to deal with their debts.

The research found that almost a quarter of those heading into retirement have no idea how they will pay off their debts. Unsurprisingly, a quarter said they were 'anxious', 'unsure' and 'annoyed' about their situation. Melanie Taylor from commercial debt management company, Debt Advisory Centre, said: "It's very worrying to see such a high number of people approaching retirement with substantial debts to clear. It's also concerning to see the lack of planning that some are doing to ensure these debts are paid."

Taylor speculates that people may just not see debt repayment as a priority when they are earning a comfortable salary, and are confident that they can manage repayments on their monthly income. They may not be able to see why they need to compromise on their lifestyle to clear their debts before they retire.
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Impact

The problem with retiring in debt is that most people see their incomes drop once they move from a regular wage to a pension, which usually means they have to change their lifestyle - even when they don't have any debts. Taylor says: "Trying to make debt repayments with a reduced income means that some pensioners will have to sacrifice more than is comfortable in order to cover priority bills such as a housing costs, utilities and food."

The research found that 25% of people saw new pension freedoms as their solution - and planned to free up cash in order to repay debts. However, Taylor highlights that this comes at a cost. She says: "I would advise anyone considering doing this to seek professional advice before making any decisions, as it will mean risking a reduced income once starting retirement."

Long-term problems

Even if they can wipe the slate clean, you have to wonder whether people who have built up debts during their working life will have similar problems in retirement. It would be optimistic to hope that after such a long time of spending beyond their means, they suddenly acquire the ability to live within their budget - especially given that so many of them will be living on less.

And while releasing funds from their pension may have got them out of trouble once, they may not have this opportunity again, so unless they work out how to live without debt, they may end up having to take more drastic action further down the line - such as selling the family home or moving in with other family members.

The experts agree that dealing with debt is far harder on a fixed income in retirement, so it's essential for those approaching retirement age to think carefully about how they can pay down their debts. It may seem like an unwelcome sacrifice at a time when all our budgets have been so stretched. However, if you leave it to retirement, you're going to find yourself having to make far greater and more painful sacrifices to make ends meet.

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