Borrowing in Later Life: What Are Your Options?
This is a collaborative post
Retirement should be an event we all look forward to, indicating as it does, complete freedom from the yoke of daily commutes and morning meetings. But people are more worried than relieved today, as the effects of economic downturn continue to affect people of all ages.
There is even evidence to suggest that those of retirement age are borrowing more than ever – indicating that you are by no means alone if you are thinking of engaging with credit. But what exactly are your options when it comes to borrowing – and are they the only ones available?
Increased Borrowing in Later Life
It is true that borrowing has increased amongst the older population in the UK over the past decade; government figures suggest that more than half a million more pension-age people have non-mortgage debt today than ten years ago – though with the caveat that fewer pensioners see their debt as a ‘problem’ per se.
There are myriad reasons why older people are increasingly shouldering debt. For one, the rising cost of living over time has devalued the State Pension, while savings have lost their spending power. Older people are also more likely now to invest more in their families, whether helping children with bills or taking everyone on holiday with them. Whatever the reason for borrowing, equitable access to money is vital for you as an older person.
Borrowing, and Alternatives
There are, naturally, many ways in which you can borrow to fund your later life. There are numerous different financial products and instruments that can be utilised to maximise the availability of cash in the short and medium term, with varying degrees of risk attached to them. Conventional forms of borrowing include bank loans and credit cards, which enable short-term access to funds in exchange for interest rates that can have limited impacts in the long term.
An alternative form of borrowing has become much more popular amongst retirees in recent years, which enables them to utilise the value of what probably constitutes their single biggest asset: their home. This is possible via an equity release mortgage that advances equity from a property to a property owner – provided they are over 55. This is a particularly powerful way to realise medium-term wealth, especially as property values have risen considerably over the past 30 years.
A Word of Caution
While borrowing can be essential to maintaining a particular quality of life after retirement, or for achieving specific goals, borrowing is a risky endeavour whichever way you look at it. Even equity release comes with some caveats and requires the sale of your home after you leave it in order to recoup the debt – effectively removing it from your estate and the possibility of inheritance.
As such, any borrowing you intend to do should be shored up with independent advice from a financial advisor. They can help you work through your goals and the various risks posed by different borrowing mechanisms, as well as charting a path to making your finances work for you and your family in the long term.
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