One In Six Are Retiring With £25,000 Of Debt

One in six over 55s approaching retirement must factor in how to pay an average £220 a month off credit cards, loans and mortgages.

Although the amount of debt owed by recent retirees is falling, a significant number still have to find the extra cash for around four years after they give up work.

Over 55s with debts owe an average £24,800 each, says the Prudential, the financial firm compiling the figures.

The number of people retiring with debt this year is the same as last year – 18% – said the firm reporting on a study of the finances of over 55s retiring in 2014.

However, the amount they owe has dropped £6,400 from an average £31,200 last year.

Who owes what

The research also showed women retiring this year are financially better off than those stopping work last year.

On average, women retiring in 2014 owe £20,700, compared with £28,100 last year.

Men owe more than women but still less compared with last year – an average £28,400, down from £33,800.

The main sources of debt for this year’s retirees are:

  • Credit cards – 56%
  • Mortgages – 44%
  • Overdrafts – 16%
  • Bank loans – 14%

The number with overdrafts and bank loans fell – from 19% and 21% respectively.

Debt stress for over 55s

Paying back money they owe is a drain on retirement income for the over 55s – if they back debts before retirement, that is money that could have been saved and invested, while paying debt back after retirement takes up around 16% of their pension income.

Although the average debt repayment for new retirees is £220 a month, many face a much bleaker financial outlook.

One in four have monthly debt repayments of more than £400 and 17% expect to still be paying off what they owe at least eight years after they have retired. A few – 2% – reckon they may never pay off their debt.

Stan Russell, a retirement expert at Prudential, said: “Debt is putting retirement income under stress. It’s a good idea to try and clear debt before retirement so repayments do not erode incomes too much or for too long. Paying down debt will make retirement incomes stretch further.”

“Debt in retirement is OK so long as people have enough income to make reasonable repayments that clear the money owed over a practical period.”

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