Seniors often find themselves in need of personal debt help because they cannot deal with the financial demands of aging. With only a retirement income, rising health care costs and the expense of longterm housing, many senior citizens turn to lenders for help. Unfortunately, not all loans are a good idea for retired individuals. If you are in too much debt, consider options to reduce the debt quickly and begin enjoying your retirement.
Challenges of a Fixed Income
The main reason senior citizens take personal loans is because they cannot simply go out and earn money. After retirement, you are suddenly on a fixed income. Social Security payments and retirement funds can be sufficient to pay for day-to-day needs. However, emergency situations can cause many problems. When you are on a fixed income, picking up some extra work hours is not an option. You only have the basic checks coming in, and you must ration these to cover even emergency expenses. This can lead to debt if you are not able to cover all the costs.
Common Debts for Seniors
The most common debts for seniors are health related. Many senior citizens have paid off homes or automobiles. They do not make a high number of purchases when compared with the average American spender. When it comes to health care, though, senior citizens outspend most Americans. Medical costs may include routine check ups, visits to specialists or even nursing home care for older Americans. A single emergency can throw a senior citizen into deep financial debt. For example, a broken bone or car accident that requires a long hospital stay can cost tens of thousands of dollars. If Medicare and insurance only covers a portion of the bill and individual is stuck with a large medical debt.
Government and Private Assistance
Thankfully, there are some options to help pay for the cost of living after retirement, without taking on personal debt. Know your benefits through Medicare, which may even pay for nursing home care after you have been in the hospital. Social Security benefits and pension benefits from your working years will also help. Having insurance may seem like a costly ongoing expense, but long term care insurance often pays off in the long run. Keep in mind that once you retire, there is a minimum monthly payment you must take from your retirement accounts, but there is no maximum. You can have your withdrawals fit your day to day needs.
The Reverse Mortgage Option
If you own a home, consider the reverse mortgage option. You can pull equity out of your home and convert it to cash to pay for immediate expenses. Of course, you will then owe to your mortgage again. However, particularly when you use an FHA guarantee on your reverse mortgage, the payment should be manageable. It can be risky to pull money out of your house. If you are facing emergency expenses, though, it will likely be cheaper to pursue this option than to take a personal loan.