DON’T LET DEBT GET YOU DOWN

Financial experts reveal five-step action plan to deal with those outstanding bills

Retirement should be a time to relax, step away from the daily grind and enjoy life.

After working hard for years, retirement is a great time to pursue your interests and dreams, but debt can be a worry when you’re retired.

Research by leading over-55s financial specialists Key Retirement found that 27 per cent of people in that age group have three or more credit cards, while 29 per cent have other forms of unsecured debt, with14 per cent having overdrafts.

In addition, 11 per cent have total debts other than their mortgage of £10,000 or more, with nine per cent paying £500 or more a month towards debt repayments excluding mortgages.

That’s a big chunk of money to pay out on a pension, so it makes sense to clear off debts in retirement in order to vastly improve your standard of living. Using property wealth is a relatively painless way to pay off debts and, in addition, enjoy a comfortable retirement. Last year, people released a record £3billion from their homes, taking advantage of rising house prices and low interest rates.

Equity release, known as a lifetime mortgage, is only repaid either when you die or move into long-term care.

It’s no wonder that a third of people turning to equity release use the cash to get rid of debt.

Equity release could provide you with a solution if you have a considerable amount of debt, or an outstanding mortgage that you would like to get rid of.

If you’re feeling overwhelmed by debt, there are free advice services that will help you plan and budget in order to pay off debts, including moneyadviceservice.org.

Key Retirement has a five-step action plan to help you begin paying off those debts: 1. Prioritise Pay off high-interest credit cards and loans first as the most efficient way to fight back against debt.

2. Transfer Take advantage of low introductory credit card balance transfers. You can move existing credit card debt from one account to another that charges a lower rate or even zero per cent interest for a specified period.

Now all you need is a plan to pay off the debt during the interest-free period.

3. Create a monthly payment

plan Aim to pay off some of the debt each month, even if it’s as little as £50.

4. Pay your bills on time Late payments could result in charges, and that will only add to your existing debt.

5. Start an emergency fund

When you set aside money for a rainy day – an emergency fund – you can dip into it when an unexpected expense pops up.

Rather than adding this on to your credit card debt, you can use your emergency fund.

So, if you’re struggling with debt in retirement, equity release could relieve your worries, provide you with a lump sum to pay off debts and reduce monthly outgoings.

Dean Mirfin, chief product officer at Key Retirement, said: “Equity release is a real alternative for over-55s who are seeing traditional retirement income solutions squeezed by historically low interest rates, and pension incomes hit by historically low annuity rates.”