What to do if You’re Retired and in Debt

Debt is a threat to the retirement plans of almost every American. A recent study by Lending Tree showed that just about every senior carries debt into their early retirement years.

The study showed that 97.1% of Americans aged 66 to 71 have debts that are not mortgages. The most recent Federal Reserve Study of Consumer Finances was in 2022, and that showed that the average debt for older adults is between $95,000 and $172,000.

That’s serious money for those depending on Social Security and other retirement accounts (IRA, 401K).

How to Pay Off Debt Before Retirement

Eliminating debt before you retire is the most obvious and smartest approach. That can help ensure you pay off debt before retirement.

Ways to do this include getting a second job, developing a budget and sticking to it, delaying retirement until you are debt free, or enrolling in a debt management program to pay off debt.

When close to retirement, you could even research loans available to seniors on social security, though that option would not eliminate the debt the way others would.

Whatever your choice, make it fast. Once you’re retired and on a fixed income, it’s highly unlikely your revenue is going to increase significantly.

There’s a much greater chance that your income will decline, which for some means putting some of those bills on credit cards, which will just pile on more debt. Much of the credit card debt will be erased when you die, but until then, you won’t have the happiest retirement.

Here are some suggestions on what you can do before you retire.

Get a Second Job

Finding a second job gets more difficult as you age, but they are there, especially in the gig economy.

The American Association of Retired Persons – commonly known as AARP – has a page that provides help for those 50 and older seeking a job. As examples, the gig economy pays to deliver meals through DoorDash, for pet sitting or dog walking, or for teaching or tutoring.

When seeking a second job, remember it’s not to fund your lifestyle, but to provide financial help before retirement. Think about what you would enjoy – perhaps a part-time job at a bookstore? — then use the money to eliminate debt so you are unencumbered when you retire.

Restructure and Live by Your Budget

Creating a budget is the best way to analyze where you are spending money. A budget tells you what you are earning, and what and where you are spending.

Many people are surprised when they see how much they are spending on restaurants or on unnecessary household items (is that third big-screen TV really necessary?).

Following the budget takes discipline and commitment, but it can be done. And when done properly, it can help.

Postpone retirement a few years

If you like your job and are making good money, you could continue working past the age of 65. Some find working until 68 helps them pay debt, others may work until 70.

By generating income past the “normal” retirement age of 65, you can pay down debt while working and avoid drawing from retirement savings to pay debts.

This strategy can be very helpful if your debt has a high interest like a credit card. Regular earned income can pay down that debt before you go on a more fixed income.

Enroll in a Debt Management Program and Pay Off Debt

A debt management plan, also known as a debt management program, is a plan set up and managed by a nonprofit credit counseling agency that helps you pay your debts.

This plan combines debt into one single payment per month, at a lower interest rate than credit cards charge. There is no loan involved, but it does require a commitment to making that one payment each month. Creditors likely will require you to close your credit card accounts, but the good news is this will prevent you from building additional debt.

Research Loans Available to Seniors on Social Security

Seniors on Social Security might not prefer this approach, but loans are available to seniors on Social Security. The law prohibits discrimination based on age. Among the “safer” loans seniors could consider are a personal loan, a home equity loan or a reverse mortgage.

This approach could provide a chunk of cash that could help in paying off debt after retirement, but each type of loan requires careful study and consideration. Among the factors to carefully consider are interest rate, monthly payment and terms. In general, the shorter the loan term (personal loans, for instance, have to be repaid in 3-5 years), the higher the payment. The key factor: Is the monthly payment affordable in your Social Security years?

Keep in mind, no loan is free. Interest will be charged and collected.

Seniors in Debt: Statistics

The Federal Reserve releases a report every three years detailing American debt.

The most recent study in 2022 showed that 53.4% of Americans over 75 have debt, the highest figure since the studies began in 1989. The average debt for those seniors is $94,620 (including mortgages).

More alarming is the fact that 64.8% of those 65-74 carry an average debt of $134,950.

Unfortunately, more and more older Americans need debt relief because clearly it’s not uncommon to be retired and in debt.

While part of the debt is a mortgage, carrying that amount of money owed on a budget can strain the fixed-income nature of retirement.

How Much Do You Need to Retire Comfortably?

Experts recommend having the equivalent of your yearly salary saved by age 30, three times your salary saved by age 40, six times by 50 and 10 times by 67. Of course, experts also recommend exercising daily and cutting out cheesecake, and America still has obesity.

One thing is for certain – nobody is going to get rich on Social Security.

The average Social Security check as of July 2025 was $2,002.39 per month. That adds up to $24,028.69 per year, which is about $8,378 above the federal poverty level for an individual.

That’s not ideal, yet a Pew Research study in 2022 showed that 27% of Social Security recipients use it as their only source of income.

The lesson here is that if you think Social Security is going to provide more than the very basics, you need to think again – then conduct some serious retirement planning.

Seniors Have Student Loan Debt

Yes, some people are still paying off student loans in retirement. The Education Data Initiative shows that 8.3% of seniors aged 60 and higher have student loan debt. The average debt for each is $37,360.

That’s significant money for those who are retired and dealing with the challenges of a fixed income.

The aggregate numbers, though, are staggering. Americans age 60 and older collectively owe more than $125 billion in student loan debt, according to September 2024 information from the National Consumer Law Center (NCLC). This debt is carried by approximately 3.5 million people.

Not paying student loans brings serious consequences. As of October 2024, about 800,000 borrowers aged 62 and over were in default because of student loans. Those on Social Security could see part of their benefits seized to pay the federal loans, leaving two of three recipients below the poverty level.

Clearly, avoiding this situation is paramount to enjoying a healthy and happy retirement.

Plan Early for Retirement

Some of the most important financial planning anyone can do is for their retirement. Social Security provides some help, but it’s not likely it will provide all the financial wherewithal that is needed.

The best time to start planning for retirement: Yesterday.

But do what, you ask? Let’s take a look at not-so-difficult approaches to ensure your financial well-being after 65.

Set a Budget Now

Understanding what you are spending and where is key to finding some money you can put toward retirement.

Track your expenses and see where you can cut back or generate more income. Chances are, you can find some fat in there.

If you can find $100 a month to put toward retirement, after 30 years, it would turn into almost $60,000 with a mere 3% interest return.

Take Advantage of Employer Retirement Contributions

An employee retirement 401K plan is one of the best ways to save for retirement. In this plan, you decide how much you want to save/contribute. Those savings are not pre-tax money. Most businesses will match a portion of your savings.

As an example: You are 25, make $50,000 and decide to save 6% of pre-tax earnings. You’ll be setting aside $3,000 per year on your own. Let’s say your business matches the first 3%. That’s another $1,500 per year for a total of $4,500, which can be invested in chosen stocks or mutual funds.

That monthly savings at a mere 3% growth rate would turn into $343,000 at age 65. A higher rate of return would produce even more retirement money.

There’s even better news about this approach: If your salary increases, a reasonable assumption, your 6% contribution will be larger, meaning you’ll have saved more money for retirement.

Anyone who works for a business that offers an employer-matched 401K would be foolish not to take advantage of this plan. The ideal approach is to put as much as you can afford into the plan, and take advantage of the free money the company provides with its matching contribution.

Consider Postponing Retirement

You can claim Social Security beginning at age 62, but the longer you wait, the more you’ll get.

The average Social Security benefit increases by 8% for each year you wait to retire. A $2,000 benefit payment at age 62 becomes $3,998 at age 70.

Keep in mind: This happens only if you wait until age 70 to take the Social Security benefit. Once you start taking Social Security, the amount will only change based on the annual cost of living.

When you choose to retire is a personal decision based on a multitude of factors. However, the decision should be made wisely, with a careful analysis of income and debt, both in the present and future.

Start Saving Now

It is never too early to start saving for retirement. The best time to start contributions to a 401K is the present. If you are self-employed or your business does not have a plan, look into a Regular or Roth Individual Retirement Account (IRA), both of which have tax advantages.

However, before you can really start saving for retirement, you need to address your debt. Because interest rates giveth and taketh away, they make every dollar you save grow, but also every dollar you owe will grow.

A mortgage is the most acceptable and beneficial form of debt because home ownership is one of the more solid investments you can make. There’s a decent chance you’ll get back every dollar you invest, and in many cases, you’ll get back more than you invested.

With most other debt, you’re just kissing those dollars goodbye.

The worst form of debt is credit card debt due to the high interest rates. The average credit card interest rate was 22% in September of 2025. Escaping that hamster wheel is a top priority. You don’t want to be filing for bankruptcy as a senior when you should be enjoying your golden years.

Many consumers have found help through debt management programs. A credit counselor from a nonprofit company helps consolidate all your debt and works with lenders to lower interest rates. You end up making one monthly payment that is less than you were paying for all those bills and within 3-5 years, you’ve eliminated the debt.

Certified credit counselors also work with clients to keep them on a budget and instill behavior that will keep them from falling back into debt. That way, they can start saving for retirement.

More and more Americans are regretting that they didn’t do that sooner.

You do not want to be one of them.