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For retirees relying on Social Security, any amount of debt can feel like a heavy weight that can’t be managed over the long term. These retirement benefits are designed to cover basic living expenses, after all, not high-rate credit card bills or lingering personal loan payments. So, it’s hardly a surprise that many older Americans who rely on Social Security also find themselves trapped in a cycle of debt they can’t get out of.
And, with today’s high inflation and elevated borrowing costs, even modest debts can spiral into major financial headaches for retirees. The good news is, though, that if you’re in a similar situation, you’re not powerless. There are ways to get rid of your debt, even if your income is limited to your Social Security benefits. To do so, though, you’ll need to understand your rights, explore your options and make strategic decisions that help protect your retirement years.
But whether you’re dealing with mounting credit card balances, medical bills or personal loans, taking action now rather than waiting can help you avoid unnecessary stress — and potentially save you thousands of dollars in interest charges. How can you tackle debt effectively while living on Social Security, though?
Find out more about the debt relief options you can take advantage of now.
How do I get out of debt while on Social Security?
The first thing to understand is that Social Security income is generally protected from most forms of debt collection. Federal law generally shields these benefits from garnishment, even if a creditor has a judgment against you. This protection doesn’t extend to debts like unpaid federal taxes, student loans or child support, but it does apply to most consumer debt like credit cards and medical bills.
This means you don’t have to panic if you’re being contacted by debt collectors, but you do need a plan, as getting out of debt when you’re living on a fixed income like Social Security requires a careful, tailored approach. Here’s a breakdown of the most effective strategies:
Cut unnecessary spending and prioritize debts strategically.
Start by writing down all sources of income and all monthly expenses. This helps you identify where your money is going and where you might be able to cut non-essential spending. Finding small savings — $20 here, $50 there — can free up money to go toward your debt. Even if you can’t pay off your balances in full, paying more than the minimum (even by $10 to $20) can help slow the pace of interest accumulation.
And remember that not all debts are equal. If you’re behind on essentials like rent, utilities or property taxes, focus on those first. After that, look at which debts are costing you the most. With the average rate closing in on 22%, credit card debt, in particular, can snowball if left unchecked.
Learn more about how to get rid of your debt for less than you owe today.
Reach out to your creditors for help.
You might be surprised how willing creditors are to work with you, especially if you’re proactive. Many card issuers and lenders offer hardship programs that can:
- Lower your interest rate
- Temporarily reduce your monthly payment
- Waive late fees
- Pause payments during a short-term crisis
You’ll need to call and explain your situation, but asking about a hardship repayment plan is a good starting point.
Consider what credit counseling can offer.
A reputable credit counseling agency can be an invaluable partner. These agencies work with you to assess your financial situation, develop a workable budget, and, if needed, create a debt management plan.
With a debt management plan, the agency works to negotiate lower interest rates with your creditors and consolidates your payments into one monthly bill. You’ll pay the counseling agency, and they’ll distribute the money to your creditors. Over time, this can save you thousands in interest and help you get out of debt faster.
Explore debt settlement carefully.
If your debts are large and you can’t realistically pay them off, even with reduced interest rates, you might consider debt settlement. This involves negotiating with creditors to settle your debt for less than you owe, generally by making a lump sum payment.
This generally results in lowering your original balance by between 30% and 50% on average, but debt settlement also comes with risks, including the following:
- Creditors aren’t obligated to accept settlements.
- You may be taxed on the forgiven amount.
- Your credit will take a hit, at least temporarily.
- Many debt settlement firms charge hefty fees.
If you go this route, be sure to choose a reputable debt relief company to work with and read the fine print before signing any agreement.
The bottom line
Debt may feel like it’s stealing your golden years, but with the right approach, you can start reclaiming your financial freedom, even if your retirement income is limited to your Social Security benefits. By understanding your protections, exploring your debt relief options and making careful choices, you can work toward financial peace of mind, even on a fixed retirement budget. If you’re feeling overwhelmed, it may help to reach out to a credit counseling agency or debt relief expert for guidance.