Retiring With Debt in 2021


At Wells Gibson we make it easier for you to visualise and achieve the life you want and will help you be financially well organised and prepared for the future.

Traditionally speaking, a solid retirement plan includes the repayment of all debt before you stop paid employment.

Retiring without debt allows more of your income in later life to be spent on living expenses, without expensive debt servicing costs creating a drag on your expenditure.

However, times change, and it is now increasingly common for people to retire with debt. New research shows that nearly one in three people are retiring in debt this year.According to the study from equity release specialist Key, those retiring with debt in 2021 have an average of £20,650 to repay. The average amount owed by those retiring this year means that retirees have debts of around a fifth higher than those who retired last year.

However, the number of people retiring with debts remained broadly the same, at 33% last year compared with 32% this year.

The findings in Key’s Retirement Ready 2021 study found the average debt owed by people retiring this year was £3,190 higher than in 2020 when new retirees owed an average of £17,460.

Men are expected to retire this year with around 15% more debt than women, on average.

This debt burden means retirement finances will be even more stretched, with 11% of retirees this year saying they do not know when they will fully pay off their debts.

While fewer retirees have credit card debt, falling from 48% last year to 40% this year, those retiring with outstanding mortgage debt remained steady at 31%, and borrowing on all other methods increased this year.

The proportion of new retirees using their overdraft increase from 10% last year to 17% this year, and those relying on borrowing from family and friends rose from 8% to 10%.

Will Hale, CEO at Key, said:

“While it is good to see that we have not seen a sharp rise in the number of potential retirees finishing work with debt, it is concerning to see that the amount owed has increased by more than £3,000 in just twelve months. This seems to suggest that those who are already in debt are finding it harder than ever to repay their borrowing and expect to be three years into retirement before they can finally wipe the slate clean.

“Unfortunately, trying to repay debt from a fixed income while still maintaining a good standard of living can be extremely difficult and people are likely to struggle to achieve this ambition. Before their borrowing spirals out of control, they need to speak to a specialist later life adviser how will be able to help them make sustainable choices around how they manage what they owe.

”Modern equity release products allow customers to repay capital as well as interest so in the right circumstances they can help people to successfully manage their borrowing.”

Repaying debt is key if you want to be less anxious about tomorrow and know you can secure all that you value. As such, if you have mortgages or loans etc, a wise financial strategy needs to be defined as part of your lifetime wealth plan.

What does your financial future look like? Do you feel anxious about tomorrow? Are you confident you can secure all that you value?

Contact Wells Gibson and find out how a lifetime wealth plan could change your financial life.