Whether you’ve reached retirement age or are planning for the future, one of your biggest financial goals is likely to be clearing any existing debt you may have. This could be credit card debt or an overdraft that doesn’t seem to go away; regardless of what it may be, it seems as though those over 55 are already way ahead of the game.
While clearing existing debt as you approach or make your way through your retirement may seem like something that should be top of your list, how exactly are the older generations doing it?
What kinds of debt are being settled?
According to Key Equity Release, over 55s used equity release to clear a whopping £612 million of unsecured debt in 2020. Among the most common types of debt to be repaid was credit cards, with an average amount of £8,500; overdrafts at an average of £2,000; and loan balances at around £11,700.
As paying off existing debt is a positive way of managing your retirement income, especially as you’re likely to be seeing a significant drop vs when you were working, there’s no surprise that so many are looking into releasing funds from their home to do so. According to data from Key Group, around a fifth of the £3.4 billion property wealth released last year was to clear unsecured debts.
Does your location make a difference?
Would you ever think that where you live made a difference to your debt? You’d be surprised to know it has more of an impact than you might think. Key found that the average credit card debts being cleared were as high as £20,300 in the South West of England, whereas in the North East they were only around £7,698.
Where loans are concerned, it seems that there’s a similar underlying trend. Those in London had an average loan debt of around £20,085, however those who live in North Yorkshire only had debts of around £10,432 to clear. Could this be due to the cost of living being significantly more in the southern parts of the UK?
Why clearing off your debt could make a difference
It’s no surprise that clearing debts makes the top of many peoples lists as they approach retirement age. Not only does it have an impact on your way of life because of your reduced income, but it can also have a significant impact on mental health too.
Will Hale, CEO at Key, said “Unsecured debt is a major issue for people of all ages and our data shows that it affects those in their 70s and 80s as much as younger people. Nobody wants to retire in debt but sometimes it is unavoidable.”
“Those who are struggling with debt need to look for support as there are options available. For some this might mean refinance debt using a more modern and flexible approach. Equity release plans enabling people to make repayments on interest and capital are increasingly playing a major role and can help people who are struggling.”
