
I want to retire but I'm in loads of debt – what do I do?
With income often dropping and expenses sometimes shifting in unpredictable ways, it's important to take stock of your financial situation beforehand.
Dennis Hussey, team manager at National Debtline who has also been a money advisor for 20 years, explains that when retiring it is 'often going to mean that income streams narrow'.
'For most people, it means that they are giving up a regular waged income and have a pension income that's possibly going to be more modest,' he explains.
What are the first steps someone should take if they want to retire but are in debt?
'Seeking debt advice is a really good start but also creating a budget,' says director of external affairs at Money Wellness, Sebrina McCullough. 'Work out what money you'll have coming in post-retirement and then think about how spending might change once you're retired.
'Money Wellness has a budgeting tool on its website which can help work out what your income and outgoings will be post-retirement, which can give people a greater sense of whether or not they will struggle to maintain debt payments.
Hussey adds: ' One of the first steps we'd cover with someone in this position going through a very thorough assessment of their current income and household expenditure, so we can help them assess how stretched they are. We would also discuss what their projected income in the event of retirement would be, so we can measure the relative impact.
'From a money advice perspective, we would draw a distinction between them meeting what we call our priorities – paying for things that keep a roof over our heads, utilities, food, etc – and then non-priority debts, which may be commitments on unsecured loans or credit card repayments. These are commitments where if you don't meet them as required, you're going to incur charges and have marks put on your credit report, but they won't directly put you or anything you own at risk.'
Is it advisable to retire while still in debt, or should you pay it off first?
'We always advocate that someone puts their health and wellbeing at the front and centre of their considerations,' Hussey says. 'What we will do is just point out any knock-on material impact that the decision will have. If we think, for example, that someone's retiring leaves them in a position where they can meet their essential obligations but they may not be able to maintain a pristine payment history or credit report, then we will point that out to them and they'll be in a position to make an informed choice.
'Without over-generalising, we find that the importance of preserving a credit file and maintaining a high level of credit is often going to be less important for a person retiring, in comparison to someone in their early working life who has aspirations to get on the property ladder – the dynamics are different.'
McCullough adds: 'It's less about whether or not you're in debt or not in debt, and more about whether or not your budget is manageable.
' People have to be proactive prior to retirement to understand what their income would look like in retirement. Therefore it's always a good idea to make sure that you've done some sort of budget in the years prior.'
What strategies can help someone reduce debt in the years leading up to retirement?
'If people can afford to make overpayments towards debt this can help,' McCullough says. 'For example, if you've got a credit card that you've been making minimum payments on and you can afford to pay a little bit more off that each month, that will help your debt balance reduce much quicker.
'If you're struggling in the years pre-retirement and perhaps don't have an additional income to try and pay your debts quicker, again seeking debt advice can be really beneficial for people in severe financial difficulty. There are also options that we support customers with, for example, debt-relief orders which are a way for debt forgiveness to be provided to those who have got no propensity to be able to repay debts short or long-term.'
Hussey says: 'We will also make people aware, where relevant, of any pension freedoms that they may be able to benefit from. We're obviously now talking about the scope to release funds from a defined contribution pension after the age of 55. The rules now allow someone in that position to release up to 25% of such a fund tax-free after this age and, in some cases, that can be something for someone in this position to consider – whether it's to raise a lump sum to pay off debts, or simply to supplement their existing income.
'At the same time, we will always point out doing that doesn't come without its downsides, as your retirement income will be lower when that time comes later down the line.'
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


Reuters
18 minutes ago
- Reuters
Commerzbank official tells UniCredit CEO to sell and go home
FRANKFURT, July 4 (Reuters) - UniCredit's ( opens new tab recent push for a tie-up with Commerzbank ( opens new tab has prompted calls by a top official of the German bank for the Italian lender's CEO, Andrea Orcel, to abandon the pursuit. With UniCredit continuing to face fierce resistance in Germany, Orcel last month sent a flurry of letters to German Chancellor Friedrich Merz and others, urging them to come to the table to discuss a deal. But the latest offensive, which only became public this week, has come up against steadfast resistance from Sascha Uebel, deputy chair of Commerzbank's supervisory board, adding to previous opposition from the German government and the bank's board since UniCredit's initial approach last September. "His next step should be to sell his shares, take his profits and go home," Uebel told Reuters on Friday. UniCredit, which last year bought a large stake in the Commerzbank and began to press for a merger, declined to comment. In his letters, Orcel wrote that a tie-up would be beneficial "economically, socially and politically" and would create a new national banking champion for Germany. Orcel was also given short shrift by the Verdi labour union, which said its concerns had not been allayed, according to copies of their correspondence seen by Reuters. "We are continuing to campaign against a merger and are in favour of an independent Commerzbank," Verdi boss Frank Werneke wrote to Orcel in a response dated July 2.


Telegraph
21 minutes ago
- Telegraph
‘I'm cash-poor but don't want to sell my home. Will my inheritance plan work?'
Receive personalised tips on how to improve your financial situation, for free. Here's how to apply or fill in the form below. Patricia Lowe finds herself in a position many other pensioners are bound to recognise – asset-rich and cash-poor. The 79-year-old wants to give £250k to her sons to spend now rather than as part of a future inheritance, but her pensions only pay a combined income of around £40k per year. One solution might be to downsize – the former adoption social worker first moved into her seven-bedroom home in Shropshire in 1981. With its striking red-brick Victorian architecture, sizeable garden and convenient walking distance from the heart of Shrewsbury, the property is worth around £800k. There's just one problem, as Ms Lowe explains: 'I don't want to move, that's the bottom line. I love this house. My children were three and five when we arrived so they really can't remember anything else. 'Obviously I could downsize, but that doesn't keep the house in the family. It would be very nice to achieve my objective of giving my children some money and giving myself some money without having to lose my home.' Ms Lowe's decision to give money to her sons is twofold: She wants to limit the burden of inheritance tax for her children and also wants the choice of giving money to her sons when she thinks they would benefit most, rather than after she dies. She says: 'I want to make sure they have money at a time of their life when it is of most use. I think usually when you get it [through inheritance], you are past the great point of needing it.' But Ms Lowe is wary of using equity release – a means by which homeowners aged 55 and over can access the equity in their homes as tax-free cash while retaining ownership of their property – because of the high interest repayments. She says: 'My mother lived to 97, well that would be 18 years' worth of interest for me. That's a hell of a lot of interest and it would completely outweigh the benefits of having given some money now because they would lose it all at the end.' One creative solution she is keen to explore is whether her sons could purchase a part of or the entire property via a limited company, after which she could then pay them rent to cover the mortgage repayments. Doug Brodie, financial planner and chief executive, Chancery Lane Ms Lowe is sitting on a goldmine owning a home worth £800k that is mortgage-free. Although she is concerned about compound interest, today's equity release products are not what they once were. Lifetime mortgages now include drawdown facilities, voluntary repayments, fixed interest rates and inheritance protection guarantees. Modern plans offer flexibility and control, allowing people to downsize their equity, not their home. A retirement interest-only (RIO) mortgage could be ideal. Ms Lowe would borrow the lump sum she needs and make interest-only repayments, with no compound build-up. Assuming a 5-6pc interest rate on a £250,000 loan, monthly repayments would be £1,040- £1,250 – well within her pension income. The capital would only be repaid when she enters care or dies, i.e. when the house is sold. Ms Lowe's own solution to let her sons buy the home through a limited company is a creative idea but it's overthinking the options. Often people take technical solutions and try to apply them to their personal positions without realising that those solutions are designed either for commercial operators or families with multi-million amounts of dormant assets. The legal and tax complexities will definitely outweigh the benefits here. With seven bedrooms, Ms Lowe could consider taking in a lodger through the rent-a-room scheme. This would mean a tax-free income up to £7,500 per year, minimal disruption and it could provide a steady gift to her sons. While not a solution for unlocking a lump sum, it could supplement her pension and boost savings – with seven bedrooms there might also be an option for Airbnb lettings. The best solution will simply be to stay away from complex products and costly over-engineered solutions. A competent equity release broker can remove anxiety in that area, and simple cash agreements with the sons will solve the rest of the quandaries. Nick Mendes, mortgage technical manager; John Charcol; and Nick Sutton, sales director, Retirement Solutions Ms Lowe's concerns around equity release are completely valid, particularly when it comes to the potential for interest to compound over time. If Ms Lowe were to borrow £250,000 against her £800,000 home, the current best rate available as of today is a 6.4pc monthly equivalent rate (MER), or 6.59pc annual equivalent rate (AER). If she chose not to make any repayments, the balance after 15 years would grow to approximately £651,261. This gives her the cash now without the need for monthly payments but does of course mean a significant reduction in the value of the estate left behind. There are ways to mitigate that compounding interest. If Ms Lowe feels able to cover the interest payments each month, there are products offering discounted rates while those payments are being maintained. The best currently available sits at 6.23pc MER or 6.41pc AER, which would equate to monthly payments of £1,298 to cover the interest. This would prevent the debt from growing over time, protecting the remaining equity. Depending on whether Ms Lowe wanted the full £250k immediately, a drawdown facility could make a great deal of sense. She could, for instance, take £150k to give as an initial gift to her sons, and retain a further £100k as a pre-agreed reserve to access later if needed, perhaps for future care costs. Ms Lowe's idea for her sons to purchase the property via a limited company is innovative but it presents several practical and financial hurdles. Company mortgages, sometimes referred to as limited company buy-to-let mortgages, attract higher rates and fees than standard residential products. Lenders often require larger deposits, and the fact that one son lives in Germany and both already hold mortgages complicates matters further. Given the tenant is a family member, the lender will consider this as a regulated deal – which will narrow the options. There are tax implications too. Selling her own home to her sons would trigger stamp duty, including the 3pc second property surcharge, and potentially capital gains tax further down the line. Additionally, Ms Lowe would lose her principal private residence relief, meaning any future sale of the property by the company would be liable for corporation tax on any gains. She'd also be paying rent to her sons' limited company, and that's income the company has to declare and pay tax on. It might feel like a workaround to unlock funds, but realistically it's unlikely to be more cost-effective or administratively straightforward than an equity release or retirement interest-only mortgage.


Telegraph
21 minutes ago
- Telegraph
Women who believe in ‘white male privilege' protected from discrimination
Women who believe in ' white male privilege ' are protected from discrimination under equality laws, a judge has ruled. Believing in the notion that white men have an 'unseen advantage' because of their gender and race is a legally protected belief, akin to veganism or gender-critical feminism. The ruling comes in the case of self-proclaimed feminist Misti Kilburn, a senior HR manager suing a global manufacturing company for belief and sex discrimination. Ms Kilburn stopped working for the company in November 2023 and began proceedings in February the following year. She is claiming for discrimination, as well as unfair dismissal, wrongful dismissal and victimisation. A genuine belief system The tribunal found that Ms Kilburn's views on white male privilege amounted to a genuine belief system that affords protection under discrimination laws. Employment Judge George Alliott said: 'It was clear to us, and we find, that [Ms Kilburn] does genuinely believe that white middle-aged men have an inherent advantage, in particular in the workplace, and that women remain disadvantaged, in particular in the workplace. 'We accept that many would subscribe to the view that in the workplace white middle-aged men have an advantage and women are disadvantaged.' Judge Alliott also said the court took note of the fact that 'glass ceilings' for women are often referred to in political debate and demonstrated by reference to the under-representation of women on the boards of FTSE 100 companies. He added: 'That said, such views, in our judgment, represent the reflection of, at least, the perceived reality where unfairness in the workplace needs to be acknowledged and addressed by equality in the workplace and the promotion of women's rights. 'It is how [Ms Kilburn] perceives the world.' 'The future is female' The preliminary hearing in Watford was told that Ms Kilburn started working for Sensient Technologies Corporation in July 2014. The business is a global manufacturer and marketer of colourants, flavours and other speciality ingredients. The hearing was told Ms Kilburn held the philosophical belief that 'white middle-aged men have an unseen, unconscious advantage or privilege in many public and private areas of their life by consequence of their gender, age and race'. She also said: 'Women remain disadvantaged in many public and private areas of their life and that factors such as ethnicity and age affect women's experience and the types of disadvantage to which they might be subject'. The panel found that Ms Kilburn promoted equality in both her work and private life and even referred to a gift given to her by a colleague, which read 'the future is female'.