Image source: Getty Images.

It's not a secret that many American households are saddled with lots of debt. Young people often have hefty student loan debt they're struggling to pay off -- and credit card debt also has many older folks feeling financially pinched.

It's a mistake to assume that people typically have their finances under control as they enter retirement. The reality is that many older Americans are still struggling with crippling debt, even after retiring -- and that's a particularly bad situation in retirement.

Hefty debt loads

Retirees saddled with significant debt is a big problem, because they're often living on smaller incomes than they used to, and it's therefore harder to make debt payments. Consider these recent findings from the folks at ValuePenguin: As of March 2016, the average total credit card debt (for households that carried revolving balances) was $16,048. Remember that that's just an average, so plenty of households are carrying more than that. And that's just credit card debt -- it excludes car loans, mortgages, student debt, and so on.

The overall average household credit card debt in America (encompassing those with and without revolving debt) was $5,700, while the median was $2,300. That's promising because it means that most people are carrying significantly less debt than $5,700 -- but it also means that there are plenty of extremely high debt loads out there that are skewing the average higher.

Taking a closer look at that $5,700 figure, ValuePenguin found that the average was considerably higher for those aged 65 and older, at $6,351 -- and for those 75 and older it was still steep, at $5,638. One major contributor of that for many seniors is medical debt. It's no secret that healthcare is very costly, and our insurance policies don't cover everything.

Image source: Pixabay.

Debt in context

An average debt load of about $5,000 to $6,000 may not seem that problematic, but consider this:

  • If you owed $6,000 on a card with a 20% interest rate -- which isn't that uncommon -- and only made minimum payments on that debt of 3.5%, or $25, because you were financially strapped, it would take you 197 months -- more than 16 years -- to pay it off, and you'd pay a total of more than $6,800 in interest alone. It might seem unlikely that anyone would do this, but it's very easy to just keep making minimum payments when someone is in tough financial shape.
  • If you're in this situation in retirement, note that the maximum monthly Social Security benefit for those retiring at their full retirement age was recently $2,639. A debt load of $6,000 would represent more than two months' worth of Social Security income.

Basically, it can be very hard to get ahead, or even to live comfortably, if you're carrying a lot of debt. Not only can it keep you worrying and losing sleep, but it can also divert many valuable dollars to interest and principal payments that could otherwise have been used to shore up your retirement war chest, or for a number of more productive uses -- such as food or housing. And if you're already in retirement, being saddled with debt can constrict your income stream.

What to do

Fortunately, all is not lost if you're struggling with debt -- even if you're in or near retirement. There are still some actions you can take to improve your financial condition.

  • Stop adding to your debt load. Remove your credit cards from your wallet, if necessary. By paying for most things with cash, you'll remove the temptation to charge things you can't really afford -- and studies have shown that we tend to spend less when we pay with cash, too.
  • Work on paying down your highest-interest-rate debts first, as they're the costliest. It's ideal to enter retirement without a mortgage hanging over your head, but if your mortgage is at 5% and your credit card lenders are charging you 20% annually, paying off the credit card debt should be your priority.
  • Pay your bills on time. Late payments can result in fees that will only hamper your debt-reduction progress. (They can also hurt your credit score.)
  • Call your credit card lenders and try to get a lower interest rate. Many people have succeeded at this. After all, your lender probably wants to keep your business and is benefiting from all your interest payments. If you've been a loyal and good customer, remind them of that -- and the fact that you can always transfer the debt to another lender with better terms.

  • Image source: Getty images.

    If you're still working but planning to retire soon, consider working a few years more and retiring a little later. Every additional year that you work is a year that you're not tapping your nest egg, and a year in which you can aggressively pay down debt. Ideally, you'll also be maintaining employer-sponsored health insurance, saving you additional dollars. If you've saved $400,000 for retirement, for example, and can let that grow for two more years at an average annual growth rate of 8%, you'll boost your savings by more than $66,000. Working longer and delaying collecting Social Security checks can make them bigger, too.

The best course of action, of course, is simply to avoid ending up deep in debt in the first place. If it's not too late for you, be sure not to charge more than you can afford to pay -- and pay your bills in full and on time. Budget conservatively, and have emergency funds available for financial crises such as a costly healthcare expense. Being able to borrow money when needed is handy, but it can sometimes get you into trouble, too.