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10 Costly Things Retirees Get Wrong About Handling Their Debt

Many retirees unknowingly cling to myths about debt that can jeopardize their financial security.

By Kristin Hitchcock

Edited by Chris Kissell

Updated May 16, 2025

Debt doesn't always disappear when your career ends. About 97% of U.S. adults between the ages of 66 to 71 carry nonmortgage debt, with the median amount at $11,349, according to a LendingTree analysis.

Mismanaging debt in retirement can chip away at your financial security. Fortunately, there are clever ways to pay off debt and protect your savings. Here's what retirees often get wrong about debt, and how to avoid mistakes.

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1. All debt is bad

Not all debt is inherently negative. While high-interest debt can be detrimental, certain types of debt — such as mortgages — can be strategic financial tools when managed responsibly.

Paying debts on time can even help boost your credit score during your golden years.

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2. You can't negotiate debt with a credit card company

Many retirees assume credit card terms are fixed, but that's not always the case. Credit card companies might be willing to lower interest rates, waive fees, or settle for less than you owe, especially if you're struggling.

A simple phone call might help you reach a more manageable payment plan. The best policy is to be honest about your situation and ask what options are available.

3. Debt relief won't cost you anything

Some retirees are surprised to learn that debt-relief programs typically come with fees. These services often charge either a flat fee or a percentage of the debt enrolled.

While a debt-relief organization might be able to help you reduce what you owe, you will have to pay for this service, and the cost can vary widely. Understanding the full cost upfront is important to deciding if it's the right option for your situation.

Resolve $10,000 or more of your debt

Credit card debt is suffocating. It constantly weighs on your mind and controls every choice you make. You can end up emotionally and even physically drained from it. And even though you make regular payments, it feels like you can never make any progress because of the interest.

National Debt Relief could help you resolve your credit card debt with an affordable plan that works for you. Just tell them your situation, then find out your debt relief options.¹ <p>Clients who are able to stay with the program and get all their debt settled realize approximate savings of 46% before fees, or 25% including our fees, over 12 to 48 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for various reasons, including their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period of time. We do not assume consumer debt, make monthly payments to creditors or provide tax, bankruptcy, accounting or legal advice or credit repair services. Not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. Depending on your state, we may be available to recommend a local tax professional and/or bankruptcy attorney. Read and understand all program materials prior to enrollment, including potential adverse impact on credit rating.</p>

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4. Credit counseling will cost you a lot of money

Nonprofit credit counseling agencies often offer free initial consultations and may provide ongoing support at a low cost.

These services often include budgeting help and financial education, making them a solid resource for retirees who are in trouble with debt.

5. Debt consolidation always saves you money

Trying to keep track of a number of different payments can be bewildering, especially as we get older. But while debt consolidation can simplify your payments, it doesn't guarantee savings.

The key to saving is to make sure the new loan's interest rates are lower than your current rates. It's crucial to compare terms carefully and ensure that consolidation truly benefits your financial situation.

6. Carrying debt on a credit card helps you build a credit score

A common misconception — even among retirees — is that maintaining a balance on your credit card improves your credit score.

However, the reality is that paying off your balance in full every month is more likely to boost your score. Carrying a balance can also lead to unnecessary interest charges.

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7. Bankruptcy is the best way to get rid of a large amount of debt

Bankruptcy can offer financial relief, but it's rarely the best solution. Filing for bankruptcy has significant consequences, including a long-lasting impact on your credit score.

Other options — such as debt consolidation or negotiating with creditors — may be more suitable for your circumstances. It's important to consult with a financial advisor before deciding to declare bankruptcy.

8. Divorce frees you from your ex-spouse's debt

Divorce decrees don't alter existing agreements with creditors. If you co-signed a loan or held joint accounts, you're still legally liable for the debt, regardless of the divorce terms.

If you are a retiree who experiences a post-age-50 "gray divorce," creditors can still pursue you for payment if an ex-spouse defaults on a loan that was in both your names during the marriage, for example.

Consulting with a legal professional can help you understand your obligations.

9. Paying off debt will quickly improve your credit score

Eliminating debt is beneficial, but improvements to your credit score may not be immediate. It can take time before your credit score reflects your good behavior.

So, be patient. The best way to improve your credit profile is with consistent, on-time payments and responsibly using credit over time.

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10. You should never touch your retirement savings to pay off debt

Some retirees are reluctant to tap into retirement savings to eliminate debt. However, there are situations where paying off high-interest debt can be beneficial.

Take a look at interest rates and potential tax implications to see if this applies to you. If you are unsure of the best course of action, consult with a financial advisor or tax advisor.

Bottom line

Retirees often face misconceptions about debt management, which can lead to unnecessary financial strain during what should be years of relaxation.

Don't get hung up on false beliefs. You may find that your debt is more manageable than you originally thought. Debt in retirement is very common, but debt payoff strategies don't have to be complicated.

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