Carrying debt into retirement is no longer taboo for many baby boomers, according to a new survey. But experts warn that too much debt can alter your plans for your golden years.
A sizable share of boomers (45%) say debt in retirement is acceptable, and nearly one in three current retirees are paying off some kind of loan – excluding mortgages, according to a survey from Ameriprise Financial Services shared exclusively with Yahoo Money.
Boomers’ more carefree attitudes differ from younger generations. Only 37% of millennials and 40% of gen Xers believe it’s okay to still be paying debt when you stop working.
“Baby Boomers are on average over $110,000 in debt,” said Amy Ovellete, director of retirement services at Betterment. “[It’s] coming from mortgage, car loans and credit cards. The other form of debt is taking on their children and grandchildren’s student loans.”
Debt consequences on retirement
Boomers don’t seem particularly worried about paying down the debt, the survey found, whether they’re retired or not.
Just under half of working boomers with debt said that reducing their debt was a top three financial priority. Saving for retirement, protecting wealth and managing day-to-day expenses were bigger concerns. Just over two in five retirees with debt said the goal made it into the top three.
But that debt can change your retirement plans, said Brent Weiss, co-founder of the financial planning firm, Facet Wealth, in Baltimore, Maryland.
A 62-year-old woman he worked with wanted to plan for her retirement three years away. She had worked in a government role for over 30 years and was eligible for Social Security and a pension.
But when Weiss sat down with her, he discovered she still had a $100,000 mortgage. She also had student loan debt she took out for her daughter and credit card debt, which combined were $150,000.
“It was a tricky thing to discuss,” Weiss said, “that maybe she didn’t save enough for retirement.”
Weiss advised her to refinance the mortgage to get a lower interest rate and focus on paying the credit card and student loan. He also recommended delaying her plans to retire by 65, a move many seniors may need to make, especially if they’re still dealing with debt.
“Once you pull the retirement trigger, you do have a reduced set of choices you can make financially,” said Marcy Keckler, vice president at Ameriprise Financial Services, a financial firm.
Getting by day by day
The top concerns for retirees carrying debt were managing their day-to-day expenses and protecting their accumulated wealth, the survey found. Both of these could be complicated by having to make monthly debt payments.
Delaying when you start taking Social Security is one way to boost income in retirement and ease the burden of debt payments, said Colin Slabach, assistant professor of retirement at The American College of Financial Services.
If you wait until after your full retirement age – which depends on the year you were born – you get higher monthly payments.
“If they wait until age 70,” Slabach said, retirees “could get 130% of their benefits.
Another retirement tip is to lower your expenses in retirement.
“There are a lot of levers to pull,” Ovellete said. “You can work part time for a few years, reduce expenses by moving to a lower cost city, or downsizing your home.”
