Over 50s: Are You Too Old For Debt?

The younger generations sometimes get a bad reputation for how they deal with money. Millennials, Generation Y, Generation Z, Generation Rent – whatever you want to call the under 30s – supposedly they are really bad with money. This is perhaps supported by people most likely to use a payday loan, who are aged between 25 and 30, because it suggests that they do not have a cushion to rely on in times of financial trouble. We don’t think it’s as black and white as that, with other factors to take into consideration.

However, Age UK conducted a study that concluded the older generations are struggling with debt, too. Reports highlight that this has been an increasing problem for the better part of the decade, with Age UK stating in 2012, that there were a rising number of older people struggling with debt.

Traditionally, your 50s and 60s are supposed to be the time in your life your finances stabilise. We are looking at why – and how – this assumption has changed. Wizzcash are looking at how serious this problem could be and what you could do to protect your finances as you get older.

How Bad Is The Debt For Older People?

Age UK’s 2012 investigation concluded that debt amongst old people had risen “sharply”, with 19% stating they were concerned about the amount of money they owed. In turn, the report established that the most serious debt problems were amongst the younger end of the spectrum (around 60 years old). Just over 1 in 10 of those interviewed reported having to borrow to pay their rent or mortgage.

In 2017 research stated that credit card debt for the those over 55 was also on the rise. The increase was expected to be an incredible 10% per year. Aviva data from the same year also concluded that overdrafts for over 55s had also increased by 17% in the 12 months prior.

Debt levels for those in their 50s were expected to be around £4,650, with £2750 on credit cards and £1300 with a personal loan, on average. The research concludes that this debt only escalates as people continue to age, expecting to reach £31,500 by the time they reach their 70s and are retired. The most concerning fact of all though might be that problem debt was increasing.

Age UK report that the rising debt in older people varies from approximately £1000 to £200,000. This could be caused by anything from water bills, rent and mortgage arrears and High Cost Short Term Credit, such as short term loans. Here at Wizzcash, we are a payday loans direct lender. We provide this kind of high cost, emergency loan to help people when they are in a tight spot, but unfortunately, we are unable to lend to those who are unemployed.

What Is Problem Debt?

Of course, all debt is a kind of problem. However, the term problem debt, or over indebtedness, is hard to define, because there is no agreeable point when owing money, or using a credit card becomes a real problem. Some people choose to measure problem debt as when an individual use more than 10% of their monthly income to deal with unsecured problem debt. This does not account for those who have secured debt and financial responsibilities, such as their mortgage payments.

What Could Be Causing This Age Group In Particular To Struggle With Indebtedness?

Minimum Payments On Credit Cards

For years, debt advice and money advice services for the over 55s has been to maintain financial standings by making minimum payments on credit cards. Typically, this is just enough money to keep the interest payments at bay but is unlikely to be knocking capital off the money owed. Continuing to use this kind of revolving credit, without making considerable efforts to pay off the money owed means the debt is likely to mount up.

Not Considering Things Beyond Your Control

Age UK report that debts are cause because older people take out loans, still in work or with a regular income and confident that they can meet the repayments. Unfortunately, they are not financed enough to manage their payments if circumstances beyond This could be ill health as they age, making them unable to work. As the age of retirement is expected to rise again, because we are all living longer, we might expect to see this kind of debt problem rise.

The Cost Of Retiring

Which? consumer research suggests that UK households will need £2200 income per month, in order to maintain their standard of living. However, the report does suggest that financial priorities change as you continue through retirement. During the early years of retirement, you are more likely to spend on recreational activities, food and drink. Later on, things like insurance premiums and utility bills become the financial concern. As we are expected to live longer, it’s interesting to wonder whether this kind of spending will continue. The sundown years are longer, but because of technological advancements, we are likely to also be healthier during this time, supporting that spending habits amongst the elderly could change. If not budgeted for and considered carefully, this could incur debt or arrears on important bills.

What Can You Do To Avoid Debt As You Get Older?

Save For Your Pension

The FCA conducted a study and found that 31% of UK adults will need to rely solely on a state pension, with no private pension pot to help fund themselves later in life. A full state pension equates to £159.95 per week. Older people are only entitled to this if they meet the national insurance requirements, otherwise you will only be given a Defined Contribution Pension (DC). This means the amount you receive from the government is dependent on how much you can show you paid in throughout your life.

Comparing this data to Which? survey that indicates you need £2200 a month or around £27000 per year. Unfortunately, the state pension leaves a £18628.60 annual gap with how much it is expected you need to live.

Paying into a pension scheme could help you avoid this. You could pay a very minimal amount into your private pension on a monthly basis and benefit from your employer contributing to your funds, too. This can be frustrating or unrealistic for those people who cannot pay into private pensions on a monthly basis. Trying to contribute or top it up whenever you can be a good idea to help your older self!

Save In Line With Your Income

You might not be able to save for your future life right now because your income does not allow it. As your income goes up as you progress through your career or your outgoings change, for example, perhaps your mortgage has been paid off, you can adjust your savings to make up for the times you couldn’t pay in. Some retirement plans have a contribution rate escalator that will do this for you.

Avoid Straying from Your Payment Plans

It can be extremely challenging when you don’t have enough money to enjoy a well deserved holiday or make purchases after you have just moved home. This could tempt some people into using their pension-pot savings or stopping their automatic contributions for something they can enjoy right now.

This could make it harder to get back into the swing of saving for retirement. It also means that your employer is not adding to your funds at the same time. This can make a huge difference in your old-age pot!

Here at Wizzcash, we could help you out when you are experiencing a financial emergency. This kind of high cost short term credit is an expensive way to borrow. Saving for retirement and planning for your financial future as soon as you are able, could prevent you from avoiding problem debt and financial concerns as you age.