More than half of people over 65 are in debt to some degree. Learn what they can do about it. © Panupong Piewkleng | Dreamstime.com

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A growing number of older adults are in debt in retirement, according to the 2022 Survey of Consumer Finances from the Federal Reserve.

Among people ages 65 to 74, the share with debt rose to 65% in 2022, up from 50% in 1989 (the first time this question was asked). For people 75 and over, 53% report holding debt in 2022 versus 21% in 1989.

This is a big challenge, since people’s income in retirement is traditionally limited. But there are strategies for tackling your balance sheet later in life.

Take note: Not all debt is bad debt. “It’s not necessarily the worst thing to have,” said Jack Heintzelman, a certified financial planner in Boston. If it’s debt that earns you a tax deduction, he said, like a mortgage, it may be fine to hang onto it while you give your money elsewhere a chance to grow.

But if the debt is straining your retirement budget or you’re paying a high interest rate, a pay-it-off plan is key. Here are some methods that can help.

Pick up side work

The traditional retirement model — work for 40 years and then quit forever — may not be the most appropriate approach anymore.

Supplementing retirement savings and Social Security benefits with part-time earnings can make your money go further and help you pay off the remaining debt.

For some people, consulting in their field is a natural step between full-time work and full-time play. Other people can monetize an interest, or pick up hourly work a few days a week.

“We have a client who works in a music repair shop for part-time income,” said Colin Day, a CFP in St. Louis. “They get to explore their hobby while also getting some level of income.”

Consider moving or downsizing

Your home is usually one of your biggest expenses, and if you live in a high-cost area, you might be paying high property taxes and maintenance costs, which eat into your ability to pay for other things.

Moving to a smaller home or to an area with a lower cost of living can free up room in your budget. You might also get better weather to boot.

“We have a fair amount of clients who are moving from states with a higher income tax and colder weather down to places like Florida,” said Crystal McKeon, a CFP in Houston, who notes that Florida has no state income tax.

Andrew Herzog, a CFP in Plano, Texas, recalls a client considering moving to a smaller home closer to his daughter, easier to maintain and potentially mortgage-free, if he can sell his current house for a high enough price.

“Downsizing can absolutely work,” Herzog said. “It’s best when you do it for multiple reasons.”

Time your Social Security

The Social Security equation — when to claim, when to wait — depends on your health, your marital status and your savings. But debt can also affect your plans.

Taking Social Security early might give you the income you need to get rid of your balances. “As long as I’m not blowing up my plan by drawing Social Security early, it could help sustain me by not having to draw down my investment assets,” Day said.

On the other hand, waiting to claim means you’ll have a higher Social Security check later — benefits increase by 8% per year after full retirement age until age 70.

Depending on the type of debt, it may be better to wait until you can throw more money at it. Talk to a financial professional about the best option for you.

“I would do the calculations,” Herzog said. “That’s a pretty big asset for people when you’re older.”

Tap home equity — cautiously

If you have equity in your home, you might be able to get a home equity loan or line of credit to help you consolidate or pay down higher-interest debt.

Take your time considering this, however, since an inability to keep up with these payments puts your home at risk of foreclosure. “You have much more to lose if you mess that up,” Herzog said.

Keep in mind, too, that the interest on a home equity line of credit is only deductible if you use it for home improvement-related expenses. And this is a better option for a one-time debt, not ongoing expenses.

“Those living expenses are just going to continue,” McKeon said. “Home equity loans should not be a first priority.”

[Ed. note: Reverse mortgages, which let homeowners 62 and up borrow against their home equity, can also end in foreclosure in limited circumstances, such as if you fail to pay property taxes and homeowners’ insurance. For more on using reverse mortgages for funds, see “A reverse mortgage can help pay for care,” July 2023 Beacon.]

—AP/NerdWallet. This article was provided to The Associated Press by the personal finance website NerdWallet.