While the so-called “pension shortfall” in the UK has been discussed at a length of late, this problem is now particularly pressing among those approaching retirement.
More specifically, 25% of Brits aged between 55 and 64 who are still in work say that they’ve only been budgeting for their retirement income to last 10 years or less, despite the current average life expectancy being estimated at 82 years.
Far from being a time to relax and travel, retirement is quickly becoming a stressful experience for UK citizens, especially if you retain debt. But what steps can you take to manage your debt in retirement? Let’s find out!
In this article
1. Can You Get a Better Deal or Consolidate Your Debt?
Debt can exist in many forms, from secured loans like mortgages to unsecured funds garnered through personal loans and credit cards.
Regardless, it’s worth reviewing your individual debts to see if you can negotiate superior repayment terms, usually through reduced interest rates. This will require you to maintain open lines of communication with creditors, making it far easier to arrive at amicable agreements.
If you have multiple debts, you may also look to consolidate these in the form of a single, monthly repayment. This will simplify money management and ensure that your debts are paid off in time while freeing you up to focus on savings and increased earnings.
2. Consider Equity Release if You’re Over 55
If you’re over 55 and want to create a lump sum to help repay your debts ahead of retirement, securing an equity release mortgage makes perfect sense.
This enables you to release some of the equity and cash from your property, either through a single, lump-sum repayment or a number of regular cash injections into your account.
This can subsequently be used to pay debts off in full or increase your regular repayments in order to clear your liabilities before you retire, depending on your circumstances.
3. Making Cutbacks
This is a rather broad suggestion and one that can include a number of different steps. For example, reducing your everyday cost of living can help you to make the most of your money, so long as you don’t overly compromise your standard of living.
At the same time, we’d recommend ensuring that you claim all of the benefits that you’re entitled to as you pass 60 and approach retirement. These include free bus passes and railcards, while people aged 75 and over may qualify for a free TV license.
On a final note, it may also be worth downsizing your home ahead of your retirement. After all, you have a three or four-bedroom home that’s paid off and is now overly spacious for your needs, creating an opportunity for you to cash in and invest in a smaller and more cost-effective property.
4. Finally – Add to Your Income Streams
Often, people who pass the state retirement age still feel fit, able, and willing to work. Such individuals can therefore boost their income by continuing to earn on a part-time basis, particularly if they have in-demand skills or exceptional experience in a particular field.
In addition to working on a part-time basis, you may also want to operate as a freelancer rather than a PAYE employee.
This affords you greater flexibility in terms of how you operate while allowing you to earn more for the hours that you put in.