One in three people retiring in debt
Research by the equity release adviser found the proportion of retirees with mortgage debt has doubled in the past 12 months.
The study shows people expecting to retire this year are facing debts around a fifth higher than those who finished work last year– although the number of those in debt has remained steady.
Key’s Retirement Ready 2021 study looks at the finances and ambitions of people expecting to finish full-time work in 2021. It found the average amount owed by people retiring in debt is £3,190 higher than in 2020 when the figure was £17,460.
Nearly a third (32%) of those retiring in 2021 will be doing so in the red, with men expecting to retire with around 15% more debt (£21,885) than women (£19,068).
The debt burden will take a toll on retirement finances as people predict they will be more than three years into retirement before being debt-free, while one in nine (11%) do not know when they will have paid off what they owe.
While fewer potential retirees had credit card debt (40% from 48% in 2020) and mortgage borrowing remained stable at 31%, borrowing on all other methods had increased. The number of people borrowing via overdrafts, loans from family and friends, hire purchase agreements and bank loans had all gone up.
Will Hale, CEO at Key, said: “While it is good to see that we have not seen a sharp rise in the number of potential retirees finishing work with debt, it is concerning to see that the amount owed has increased by more than £3,000 in just 12 months. This seems to suggest that those who are already in debt are finding it harder than ever to repay their borrowing and expect to be three years into retirement before they can finally wipe the slate clean.
“Unfortunately, trying to repay debt from a fixed income while still maintaining a good standard of living can be extremely difficult and people are likely to struggle to achieve this ambition.”