The ideal situation for retirement is to enter it debt-free.
But that's not the case for many consumers who are carrying high levels of credit card debt as they're nearing retirement or already there.
"That's the fastest-growing segment of clients we counsel right now is senior citizens," said Todd Mark, vice president of education at Consumer Credit Counseling Service of Greater Dallas. "We're seeing people at or near retirement and they're coming to us."
There are several reasons for this.
"With the economy, it's completely fractured their long-term financial planning and retirement," Mark said. "Any retirement planning they've done is lost because of the last decade."
According to a survey by CESI Debt Solutions, a national nonprofit credit counseling organization, 56 percent of retirees had outstanding debts when they left the workforce — and 96 percent refused to delay retirement because of the outstanding debt.
Once retired, the survey found, 53 percent used credit cards to buy medicine and pay for visits to the doctor and hospital and other medical expenses.
Many seniors are also using credit cards to help adult children who have lost jobs.
Whatever the reason, being in heavy debt when you're nearing or in retirement isn't the best place to be, especially since you most likely will be on a fixed income in retirement.
"Debt is going to be a major obstacle in their retirement goals," Mark said. "The idea of retirement is to be free of obligations so that you can have your normal living expenses, and that's all you're drawing down your funds for. Those debts are going to hold you back, and they could sink you from achieving your goals."
But there are things you can do.
REVIEW YOUR GOALS: Take a hard look at your financial planning and goals as you near retirement age. Have you built up the nest egg that you had planned on? Has the recent recession taken too big a bite out of your savings?
You may need to alter your strategy or your portfolio.
"They need to revisit their financial plan and see if it's still valid, if they're still on pace to achieve their goals," Mark said. "Figure out what's gone wrong and what unexpected variables you need to adapt to."
KEEP WORKING: You may have to delay retirement until you pay off or pay down your debt.
"If their goal is to retire at age 65, and say if they work three more years, that means three years of more income, three less years to have to draw down from your retirement and other resources," Mark said. "It's three more years of building that nest egg up."
And three more years to pay down your debt.
FIND OTHER INCOME: You may need to look for a job that would provide income to supplement your savings. Maybe it's a part-time job or maybe it's a second career.
Credit expert John Ulzheimer suggests that you consider taking your Social Security benefits early and use that money to pay off your credit card debt "because the longer you have the debt, the larger your balance is going to be because you're compounding interest year over year."
However, don't start tapping your Social Security benefits until you do some hard number-crunching.
Most financial advisers say that, if you can afford to, you should wait until full retirement age — 65 or later — to tap Social Security, because the longer your wait, the higher your benefits.
Ulzheimer, president of consumer education at SmartCredit.com, said another source could be the money received as part of your required minimum distribution from certain retirement accounts.
That's the amount that traditional, SEP and SIMPLE IRA owners and 401(k) plan participants must begin withdrawing from their retirement accounts by April 1 following the year they reach age 70 1/2.
"Paying off a credit card is not a bad way to spend that mandatory withdrawal, because it's likely not earning the same interest you're paying to the credit card issuer," Ulzheimer said.
However, other experts say that instead of using retirement savings to pay off debt, you should look for ways to reduce your expenses, which will enable you to pay off your debts faster.
A REVERSE MORTGAGE: Ulzheimer said a reverse mortgage might be an option for some seniors.
That's a loan that enables homeowners 62 years of age and older to convert part of the equity in their homes into tax-free income.
With conventional mortgages, borrowers make monthly payments to lenders. But with reverse mortgages, the homeowners receive a lump sum, a monthly amount or a line of credit and don't have to repay the debt for as long as they live in their homes.
The loan is repaid upon the sale of the home or when the homeowner dies.
"The rates are better than what you're paying on your credit card debt," Ulzheimer said.
But reverse mortgages aren't for everyone.
For seniors who own their home outright and are in the "late stages of retirement," a reverse mortgage should be a "solution of last resort because it's so very expensive in terms of fees, and the amount you're getting back in income — there's interest assessed on that as well," said Jean Setzfand, director of financial security at AARP.
Scott Norman, president of the Texas Mortgage Bankers Association, said a reverse mortgage is not as expensive as some believe.
"When you look at the new products on the market today, you quickly find out that, in many cases, a reverse mortgage may be cheaper, both short term and long term, than a home equity loan," he said.
If you do consider a reverse mortgage, shop around and be sure you understand the terms.
PLAN AHEAD: Don't let retirement sneak up on you.
"When you're in the 10-year window before retirement, you should be weaning yourself off reliance on credit cards," said Ulzheimer. "You shouldn't use them to the point where it's subsidizing an income."
If you're nearing or in retirement and find yourself drowning in credit card debt, here are some tips:
Consider postponing retirement until you've paid off your debt.
Look for ways to cut your expenses, which will enable you to pay off your debts faster. Do this before tapping your retirement savings to pay off debt.
If you're already retired, look for a job that would give you extra income.
Consider a reverse mortgage, but only if you own your home outright and understand the terms of the loan.
Consider credit counseling, which will help you develop a plan to pay off your debts.
Source: McClatchy-Tribune Information Services.