Secured debt such as mortgages accounts for £73bn of the estimated £85bn held by over 65s that is secured, over-55s financial specialist Key Retirement found.
And nearly 40% of 65-74 year olds with an interest-only mortgage will struggle when the capital repayment is due.
The worry of debt in retirement is only going to get worse, with levels of both secured and unsecured debt held by over-65s on the rise. Since 2016 it has increased from £70bn to an estimated £85bn in 2018.
Dean Mirfin, chief product officer at Key Retirement, said: “The issue of debt in retirement isn’t discussed as openly as it should be. However not only is it a problem, it’s a growing one.
“Pensioners worried about debt are not alone. We are all living longer and that means our savings have to last longer and we have to plan more carefully. Helping out family can also rapidly cut retirement funds while pension freedoms make it easier to access cash.”
Credit card and loan debt is preventing more than one in five over-65s from enjoying retirement as they struggle to maintain their standard of living, with one in seven (14%) relying on credit cards to boost their income in retirement.
Some 26% of over-70s are juggling three or more credit cards and one in 10 have had a balance they’ve not cleared for more than a year.
Debt in retirement is not caused by over-spending however. A combination of inadequate saving, the launch of pension freedoms and unexpected bills have meant pensioners need to rely on borrowing in retirement.
More than half (55%) said they had to pay unexpected bills on credit cards, with car repairs the biggest issue followed by emergency house repairs.
Key is campaigning with independent financial expert Alvin Hall to highlight the issue and has launched a guide Managing Debt In Retirement outlining how to be more debt savvy both before and during retirement.
Alvin Hall, independent financial expert, said: “A comfortable stress-free retirement is what we all want but debt is increasingly a silent source of worry for too many retirees.
“There’s a saying from my childhood I tell those who feel trapped by debt: We can’t change the past but we can change our future. Breaking through what’s created worry and understanding the problem is the only way to move forward.”
Key’s guide aims to help people become retirement ready with clear advice on options for managing and eradicating debt. It also considers some of the pros and cons of boosting income by carrying on working as well as downsizing and releasing property wealth for homeowners.
Jon Tweed, head of sales for lifetime mortgages at One Family Bank, added: “From our viewpoint, we see a fair number of our customers using our products for debt consolidation and within that there is the interest-only.
“It’s those customers that would’ve been drawn to traditional residential mortgages but have been attracted to equity release with flexible products, such as fixed early repayment charges instead of lifetime early repayment charges.
“This gives people peace of mind should their circumstances change. Equity release also helps pay off any debt they have in retirement by freeing up more income.”