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Most retirees, especially those who've taken out an annuity, will know exactly how much they've got left to spend on the rest of their lives; it would usually be difficult for them to add extra funds. That's why it's so important to take care of debts before you retire – yet many over-55s are struggling.
Specifically, Key Retirement figures show that 38% of those aged 55 and over struggle to clear their credit card debt every month, while 14% have even been stuck with credit card debt for more than a year. Unless you've got an interest-free offer, credit cards aren't really sustainable as long-term debt facilities.
Yet some don't seem to understand the full cost of their plastic, with 43% admitting that they don't know what interest rate they're paying. This is worrying as, compared to unsecured loans, credit card interest rates are generally quite high, with 11% of those surveyed paying more than 20% in interest on their debt per year.
And it's not just credit cards that are a worry, with 32% of respondents having other debts that include personal loans, car finance and overdrafts. All of this is likely to not only cost them a lot in interest every month, but also gets in the way of saving for their impending retirement.
The 13% of working over-55s who owe £10,000 in debts would particularly be much better off with that money in their pension pot. Of course, this is much easier said than done. The benefit of still having an income is that you'll likely have more breathing room to deal with your debts.
If you're struggling with debt, you could read our tips on becoming debt-free, make sure you've got a competitive credit card with an introductory 0% interest offer to give you time to pay back what you owe, or consolidate all your debts in one single personal loan. For those who are already retired, there's still equity release to consider as a means of gaining extra cash.
Whatever you decide to do, Den Mirfin at Key Retirement warns that "it is important to take action before you retire. Burying your head in the sand is not a solution as the worry which follows can prove life-changing … Seeking independent specialist financial advice can help people ensure they are retirement-ready and as debt-free as possible before they stop work."
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