Imagine this scenario: 72 -year -old retired Christopher and have multiple medical conditions that limit his movement. He has no retirement savings, so he lives outside social security alone and completes this income with credit cards.
But now he got $ 77,000 from credit card debts and faces some difficult options.
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Christopher is stuck in a course where, after he paid the minimum credit card payments every month, only his check remains in social security. Therefore, it is used its credit cards to cover the gap.
One of the bright points on the Christopher’s financial trip is that he paid his home and is about 350,000 dollars. He wants to leave the house for his adult children, but he does not know whether it makes sense to sell his house to pay the debt and reduce its size – or simply ignore the debt for its remaining years.
To find out what is better, let’s get into the numbers.
Nearly half of the Americans have more than 50+ credit card debts from month to month, along with 42 % of Americans between the ages of 65 and 74, according to Aarp modern survey.
The poll also indicates that about half of the elderly who have credit card debts feel financially insecure. Among those in this group, more than half of them have credit card assets worth $ 5,000 or more – and half of nearly half say their balance has grown since the previous year.
So why do Americans carry 50 and above a lot of debts? In many cases, it has nothing to do with trivial spending – the higher causes include the cost of daily expenses, as well as vehicle costs and housing. Many also report that health care contributed to their debts.
Retired people have some options to reduce debts, such as reducing expenses, using some of their savings or even part -time work. They can also unify their debts and possibly negotiate a better price, use the cash value of the insurance policy for debt payment, or even get a reverse mortgage. It may be useful for retirees with a chat with a financial advisor about their options.
In the Christopher case, his expenses have already been reduced as most of his money is spending health care and payment of his credit card. It is in a course where there is no new debt to get rid of food or medical care.
He has no savings or life insurance to benefit from it, and although integrating his debts may reduce the benefit he pays, he can still face high monthly payments with a lower ability to cover his expenses.
Therefore, should Christopher be ignored?
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Ignoring the debts of credit card is not really a practical solution. Without any savings, Christopher may need to rely on his credit card. In addition, if he stops paying payments, it is likely to be caught by debt collectors, making his golden years less fun.
With the presence of property rights in his home, he is not also “resistant to the creditor” and risks prosecution, in which case he may be forced to sell the house. Take into consideration, wondering whether he should sell the house now and use profits to pay off his debts and live outside the remaining stocks.
On the other hand, by keeping the house, he can keep what is possible to be one of the estimated assets, and he will not have to pay the costs of moving and transactions. Although he has many medical conditions, he is still able to take care of himself and his property, and hopes for a lifetime instead of moving to a long -term care house.
Christopher can think of the reverse mortgage, which will allow him to borrow money against shares at his home. Its credit rating may not affect its ability to obtain a reverse mortgage, and it is likely that the benefit that accumulates over time is less than the benefit that accumulates on the credit card balance.
If he will borrow more than debt balance, it may also be more able to cover its expenses over the next few years. When he dies, his adult children can either sell the house to pay the lender or pay it from their savings and keep the house.
Income from the reverse mortgage is not taxable, but if the balance accumulates in the savings account, it can be calculated for the maximum assets of Medicaid. Therefore, if you are eligible to get Medicaid, you will need to work with your lender to organize reverse mortgage payments in a way that avoids any discounts on your benefits.
Christopher can decide to continue making the minimum monthly payments on his credit cards and keeping home. In this case, when he dies, his property will be asked to pay the debts with the additional interest that has been accumulated, which means that his children may have to sell the house to cover this.
Whether he sells debts and pays it now, he completely ignores the debt or borrows to pay the debt, because its property will ultimately be less than the value of the house he wants to leave for his children.
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This article only provides information and should not be explained as advice. It is provided without guarantee of any kind.
