7 Ways to Get Out of Debt When You’re Retired
Debt doesn’t care how old you are. That’s probably small comfort if you’re retired and trying to pay down balances on a fixed income in retirement.
In The Penny Hoarder’s 2026 State of Debt report‘s survey, nearly a quarter of respondents age 60 and older said they’re stressed, anxious or embarrassed about their debt. The top source of their debt was credit cards, which can be the most expensive debt to carry with APRs averaging well over 20%.
With the cost of everything continuing to climb and Social Security struggling to keep pace, paying off debt can feel impossible. But it doesn’t have to be — we have some practical ways to pay down balances so you can enjoy your retirement with less financial stress.
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7 Ways You Can Pay Down Debt in Retirement
Managing debt in retirement can be stressful. After all, these are meant to be your golden years — a time to live lavishly, travel often, explore new hobbies and let all your hard work pay off. At least in theory.
But with the threat of high-interest debt, it can be challenging to treat yourself to much of anything in retirement; instead, your day-to-day might be consumed by stress and fear.
Looking for help? Here are eight ways to manage and pay off your debt in retirement.
1. Stop Taking On New Debt
The first step to reducing debt in retirement is to stop acquiring new debt. Easier said than done, of course, especially when inflation is eating into your budget.
However, getting out of crippling credit card debt is nearly impossible if you swipe your card for every purchase. Instead, create a realistic budget. Start by calculating how much retirement income you receive each month, including from Social Security, retirement accounts, income and other sources.
Then, figure out what essential bills you have to pay each month. Remember to include your monthly debt payments in this total, and consider incorporating debt payoff methods like the debt snowball into your budget. Use a free budgeting app if you need help getting started.
2. Cut Down Your Expenses
During the budget exercise above, review your monthly spending habits to see where you can cut back — canceling unused subscriptions is typically a good place to start. Use any savings you get to help pay down your credit card debt.
Here are some other easy ways you may be able to cut down expenses:
- Adjust your auto insurance: Car insurance prices for seniors tend to go up once they hit 70. Shop around for a new policy, see if your AARP or similar membership can get you any discounts, take a defensive driving course or just raise your deductibles to lower your rates.
- Rethink gifts: Grandparents love to shower their grandchildren with gifts — and you should feel like you can do that in retirement. However, everything in moderation. Examine how much you’re spending on gifts for family, especially grandkids. If you scale back, will you be able to enjoy more time with them because you’re not so stressed about money?
- Change your entertainment spending: Retirement should be about enjoying the finer things in life, but not at the detriment of your finances. Consider if you need to cut back on how often you dine out and book more budget-friendly vacations in retirement.
- Make easy home upgrades: Utility bills can quickly drain your budget. See if there are easy home improvements you can make to improve the efficiency of your home — install a low-flow toilet, replace incandescents with LEDs and use caulk to prevent air leaks. Simple adjustments like this can reduce your monthly utility spending significantly.
3. Consider Your Living Situation
You may not have considered ways your home could help you pay off debt:
Downsize. If your house is paid off — or close to it — selling it to downsize to a smaller home may be an option. You can reinvest that money in a smaller home that’s cheaper to manage and potentially have money left over to pay off debt.
Consider a reverse mortgage. If you need more income every month to avoid using high-interest credit cards, you could apply for a reverse mortgage. These let you tap into the equity you’ve already built in your home. However, keep in mind there are risks associated with a reverse mortgage, and you likely won’t be able to leave the house to your heirs (or even your surviving spouse, depending on how the reverse mortgage is done).
Get a roommate. If you don’t want to move out and have the space, taking on a roommate could be a great way to bring in extra income to put toward your debt. A roommate can also potentially offer the additional benefits of companionship, which can ease loneliness and isolation.
4. Get a Part-Time Job
If you’ve cut expenses as much as you can but you’re still finding it hard not to take on new debt — or pay down existing debt — you may need revenue on top of your Social Security benefits. To bridge the gap, consider taking on a part-time job.
For instance, some retirees may re-enter their industry as a consultant on a contract basis. Others may turn their arts and crafts into sellable pieces online. If you’ve got a passion — whether it’s gardening, writing, teaching or even working on cars — think about how you can monetize it.
If you’re willing to learn something new, you could get a side hustle. You could drive for Uber or Lyft, become a pet sitter on Rover or try out mystery shopping. Getting a work-from-home job could let you make money from your sofa.
5. Consolidate Your Debt
Consolidating your debt with a debt consolidation loan or a balance transfer credit card could be helpful if you’re juggling multiple high-interest debts but can qualify for a lower rate now.
In fact, if you can get a balance transfer credit card and have a strategy to pay off the debt during the 0% intro APR period, you might be able to get out of debt without paying another cent in interest.
Before you consider this option, consider your past spending habits. If the new credit line is too tempting that you end up spending more, you could wind up further in debt.
6. Tap Into Your Retirement Fund
Your retirement fund is supposed to carry you through your remaining years, helping you cover everyday expenses and rising medical costs. But if you’re drowning in debt early in retirement, it may be worth accessing more of your retirement savings now to pay down the debt.
If you use a good chunk of your retirement savings to do this, however, you’ll need to make sure you still have enough left over to get you through retirement. If not, you’ll need to find more ways to cut costs (like moving in with family) or adding revenue streams (like getting a part-time job).
Note: We don’t recommend this strategy if you’re younger, as you’ll pay penalties to access your retirement savings, and you’re reducing the growth potential of your investments.
7. Access the Cash Value of Your Life Insurance
If you purchased a permanent life insurance policy, it’s likely been building cash value over the years every time you’ve paid a premium. The policy beneficiary will get that cash value when you pass — but you can also borrow against the cash value you’ve built or make (taxable) cash withdrawals from the cash value.
Alternatively, you can surrender your life insurance policy. Your beneficiary won’t receive the death benefit, but you’ll immediately get the cash value you’ve accrued over the years. (Some life insurance policies may charge a surrender fee.)
Make sure you speak with an agent to understand your options — borrowing against cash value and surrendering the policy — and what financial impacts it will have.
What Happens to Debt When You Die?
If you carry debt deep into your retirement, it’s possible you could pass away before you’ve paid it all off. So what then? Different types of debt are treated differently. Here’s what happens to debt when you die. But let’s stay positive and work toward paying off the debt so you can simply enjoy your retirement.
Contributor Timothy Moore covers banks, loans, taxes, retirement and more for The Penny Hoarder. His work has appeared in publications such as Forbes, USA Today, Retirement Living and LendEDU. Senior managing editor Tiffany Wendeln Connors updated this post for 2026.
