How Do I Manage Debt When I'm Retired?

Retired couple considering their finances

Most people think of debt as something that younger people deal with. By the time you retire, you should be out of debt, right? Not necessarily. Many factors can affect how much debt you carry into retirement and even how much new debt you accumulate in retirement.

If you purchased a new home or car shortly before retiring, you might be dealing with the monthly payments. In fact, 30 percent of seniors still have a mortgage. If you’ve had medical issues that weren’t completely covered by insurance, that can create debt.

Dealing with debt in retirement lowers your chance of being able to pay it off and can also put a strain on your limited income. Here are a few ways to manage debt when you’re retired:

Managing debt in retirement

Know How Much You Owe

Create a spreadsheet to help you see all of your debt as a whole. Create a five-column sheet that shows your creditor’s contact info, the type of debt, your monthly payment, your total balance, and your interest rate. This will help you determine what needs to be paid first and help you get the big-picture view of your debt situation.

Pay Off the Right Debt First

As you’ve probably figured out by now, not all debt has the same impact on your financial situation and credit score. Good debt includes your mortgage; it’s secured, provides an asset that grows over time, and has some tax-deductible benefits. Credit card debt, on the other hand, is bad debt.

Work on paying off your highest interest debts first, like your credit card balances. It will save you money over time. Your mortgage may be at a 6 percent interest rate while your credit cards can be as high as 18-24 percent. Plus, credit card debt can impact your credit score, your ability to get loans or lines of credit in the future, and have no other benefits like tax-deductions.


If you no longer need all the space you have, consider downsizing. Selling your large home to purchase a smaller one can reduce or eliminate your monthly mortgage payment. You might even walk away with extra cash to pay off other debt or put into savings.

As you pack for your move, consider getting rid of items you no longer need or want. They can bring in extra cash. Artwork, electronics, furniture, and other household items can all be valuable assets that can be used to reduce your debt.

Decide What Debt to Keep

As previously mentioned, some debt has benefits, like reducing your tax liability. But there can other benefits to consider as well. If your interest rate on a loan is low and the interest you earn on an investment is high (or at least higher than your loan interest), you’ll come out ahead by investing your money instead of paying off the debt. You can then use your investment payout to pay your loan and have cash left over.

Another reason to hold on to debt is to reduce your risk. You don’t want to reduce your savings to pay off debt; you may need that money for an emergency or even simple living expenses.

Get a Job

Taking a part-time job in retirement can help you manage and reduce your debt. You can put all of your extra income towards your debt, reducing your monthly payments quickly and bringing your budget into a positive place.

Managing debt in retirement doesn’t have to be stressful, but it does take some thought and planning to do it right.

Tagged in Retirement, Debt strategies

Emilie writes about overcoming debt, while balancing trying to eat healthy, stay fit, and have a little fun along the way. You can find more of her work at

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.