Is a well-earned retirement becoming a thing of the past?

A debt-free retirement may be more of a dream than a reality...

How many of us dream of the day we can escape from the treadmill of work to concentrate on enjoying our retirement? The mortgage fully paid off, a nice little nest egg in the bank, no more money worries and a chance to do all the things we never had time to do in the past.

For the majority of over-50s today, a worry-free retirement is becoming more of a dream rather than a reality. Are we looking at a first group of older people going into retirement facing mounting financial worries with outstanding mortgages and unsecured credit commitments?

When they reach retirement, most people find that their income falls, which puts them at greater risk of financial difficulties. Many are now beginning retirement with the burden of debts already eating away at any money they have set aside during the working lives.

It seems that now debt is now the norm for people of all ages, and a recent survey of CCCS clients revealed that the over-40s age group have the highest amount of unsecured debt, with the sub-group of 55-59 year olds owing the most. As CCCS revealed this week, the average debt is around £25,000!

Debt in retirement

There are various reasons behind debt problems in retirement – these include:

• Falling victim to debt as benefits and the state pensions fail to keep up with the cost of living
• Changes to circumstances damaging their financial status and their ability to manage their money
• Private pension provision doesn’t come up to expectations and changes in situations, such as illness, disability, divorce and bereavement exacerbate the situation
• Children also turn to the ‘bank of mum and dad’ to help them with their finances, to keep out of debt

And it’s not just parents who are helping their kids. Grandparents are also putting their hands in their pockets to help grandchildren. Families are pooling together to help the young ones stay out of debt, but getting into trouble themselves.

Older debt

Generally older people in their 70s used to be less likely than other age groups to access credit, and were more likely to see themselves as savers rather than spenders. They tended, on the whole, to be good money managers. They knew that in days gone by, if you wanted to buy something, you saved up for it. There was no facility to buy goods on plastic!

However, according to AgeUK, they are now among some of the biggest spenders on credit cards. The main problem could be that pensioners are becoming victims to rising costs and falling income, while still trying to help their nearest and dearest also avoid debt.

So with the recent downturn in the financial climate, do we need to get back to basics? Do we need to prioritise our own needs first and secure our future? Do we need to ditch those credit cards? And can we say “no” to the constant requests from our kids without feeling guilty?

We would be better off if we did.

Support and debt advice for older people

In the current economic climate we need to make sure that support and advice is given to those older people who are in debt, and those who are at risk. Trying to retire with £25,000 of unsecured debt isn’t going to happen – it’s going to mean they keep working into their late 60s and 70s.

If you are approaching retirement and worried about how you will manage, have a read of our recent MoneyAware blogpost which has a retirement guide and links to charities with lots of useful tips and advice.

Or you can use our online debt counselling for further help if you or an older member of your family is struggling with debt.