How To Pay Off Your Debt In Retirement

7 ideas to get that albatross off your neck


March 3, 2020 – By Rachel Hartman

How to Pay Off Your Debt in RetirementWhile stepping into retirement might mean walking away from a job, many Americans are dragging financial baggage into this next stage: debt.

In recent years, the amount of debt retirees carry has grown, and the numbers are troubling from both a monetary and emotional standpoint. In 2016, 60% of 65+ households had debt, up significantly from 1992 when just 42% did, as Next Avenue has noted.

“It can be difficult to pay off debt after retiring, especially if you are on a fixed income,” says Katie Ross, education and development manager for American Consumer Credit Counseling, a national financial education nonprofit.

Here are seven ways to reduce, if not eliminate, your debt in retirement:


Interest rates have generally been on a decline since 2018, making this potentially an ideal time to refinance and lower your debt. And the Federal Reserve Board recently said it may cut interest rates soon due to the coronavirus’ effect on the U.S. economy.

If you took out a mortgage or car loan several (or more) years ago, compare the rate you’re paying to what lenders are charging today.

“Consider refinancing the debt to obtain better terms for your situation,” says James Curry, vice president and assistant director of wealth management at Greenleaf Trust in Kalamazoo, Mich. The move could lead to lower payments or a shorter term, making it more manageable to pay off the new loan.


“The biggest bill most people pay is their mortgage,” says Andrea Woroch, a personal finance expert. If you’re carrying a mortgage into retirement, you may want to sell your home and move to a less expensive one — or rent.

“Not only will you reduce your monthly mortgage payments, but you will likely spend less on other bills like lawn care, heating and air conditioning,” Woroch says.

If the furniture you now own won’t fit in the new space, you could sell it and use the proceeds to pay off other debts faster.


“Come up with a plan on how you want to go about paying off your debt,” Ross says.

There are two ways to go about it.

Do you want to pay off the smallest balance first? Doing so can be motivating, since you might be able to get rid of a single debt in just several months. You can then move on to the next smallest balance, and so on.

This strategy, popularized by personal finance radio host and author Dave Ramsey, is known as the snowball method. It gets that name because attacking debt this way lets you start small and build momentum, tackling bigger debts as you go.

Alternatively, you could work on bringing down your debt by focusing on the interest rates you pay. Find the loan or credit card with the highest rate and work on paying that off first. You can then move to the debt with the next highest rate and pay that one off. This method is known as the avalanche strategy.


If you have many debts with high interest rates, combining them into one can simplify the payment process and make it easier to track your progress.

You could use a single personal loan, for instance, to consolidate several credit card balances with steep rates.

While average rates on credit cards today are more than 13%, some personal loans of two to five years are charging just 6% or so, according to

Your rate on the new loan will be largely based on your credit score. But “some lenders offer discounted rates to applicants who have accumulated retirement savings,” says Tanya Peterson, vice president of brand with Freedom Debt Relief, a debt resolution company.

Another way to consolidate credit card debt: transfer your balances to a balance transfer credit card.

This kind of card usually offers a promotional rate, such as 0%, for 15 months or so. Just beware of the fees and the subsequent interest rate: if you don’t pay off the debt before the initial 0% ends, the new higher rate and balance transfer fees could cancel out any overall savings.


There are also helpful apps for your phone or tablet that can help you manage debt. Three that cost less than $1 to download:

Debt Payoff Planner: The free app is compatible with Android and iOS. You enter your debts, put in your monthly payment budget and then see how long it will take to be debt-free.

Debt Manager: This app, available on iOS, lets you make a list of your debts and prioritize them. After paying off one debt, the app transfers the amount you’ve been paying to the next one in line.

Debt Book: With this graphic-laden Android app, you enter your debts and track your payment progress.


Many banks let you set up automatic, recurring debt payments to be made every month. Start by setting the payments to at least the minimum amount due each month. Then, use a calculator like the one at to see how long it will take to get rid of the debt. After that, increase your monthly amount to pay off balances faster.


To bring in extra income you can use to pay off debt, consider taking on part-time work. “There are plenty of side hustles you can do when it’s convenient for you and right from your own home,” Woroch says.

For instance, if you love pets, you can sign up to be a pet sitter at Another option: put your expertise to work by teaching or giving lessons at If you’re crafty, you might set up a shop on to sell items you make.

Or look into consulting work in the industry you formerly worked in. You might even find your previous employer could use the expertise of people with years of experience, like you.