Retirees should use these 3 strategies to get rid of debt in 2026, experts say

As the calendar flips to a new year, it's an ideal time to take stock of your financial profile. For many, the last few years have been tough financially, especially when it comes to debt. U.S. household debt hit a record high of $18.59 trillion in the third quarter of 2025. Individual borrowers are saddled with nearly $105,000 in consumer debt, according to Experian, including $6,735 in credit card debt. And despite falling at the beginning of the year, the average credit card rate has now climbed to an average of 22.83%, which can be crushing for many people.

These numbers make it hard to manage debt, let alone pay it down. This is particularly true for many seniors and retirees who rely on limited budgets to stay afloat. High-rate credit card debt can slowly drain their income and affect their ability to live comfortably and financially independently. Fortunately, there are some expert-recommended strategies for retirees to get rid of debt for good in 2026.

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Retirees should use these 3 strategies to get rid of debt in 2026, experts say

Here's what seniors should focus on, experts say, if they're trying to get rid of their debt in the new year:

Cut unnecessary expenses

According to a CivicScience study, 25% of U.S. adults used their credit cards to pay for gas, groceries and other necessities. That number jumps to 41% among adults who depend on credit cards for purchases once rent or mortgage payments, utilities, car loans and childcare are paid. For seniors and retirees living on fixed incomes, this reliance on credit cards can quickly strain an already tight budget.

Before making more strategic moves, retirees on a fixed or limited income may benefit from some old-fashioned budgeting.

"The best debt-reduction approach for retirees living on a fixed income is to review their budget and make a list of expenses and how those expenses are being paid," says Leslie Tayne, a financial attorney and author of "Life and Debt." "Many retirees need to use a credit card as a supplement to income, so prioritizing paying off debt requires an understanding of income and payment methods. Once retirees understand where the money is going to reduce debt, take a look at what expenses are unnecessary, perhaps life insurance or car payments, or find a way to downsize or bring in extra income with a roommate."

Find out how to start tackling your high-rate debt today.

Lower the cost of high-rate debt

Credit card interest rates remain firmly over 22% as we head into 2026. High interest rates make it difficult for retirees to put a dent in their debt balance while still meeting other financial obligations. If it's not possible to increase payments, focus on reducing the cost of the debt itself.

"When there is truly no extra room in the monthly budget, look at lowering the floor before raising the ceiling. Instead of trying to pay more, the focus becomes reducing required minimum payments through interest rate negotiations, balance restructuring or consolidation," Tanner Merritt, a certified financial planner at Life Planning Partners, explains. 

Michael McAuliffe, founder of the nonprofit credit counseling agency, Family Credit Management, stresses the importance of not adding to your debt level with new charges or accounts, then negotiating to try and lower your high interest rates. 

"You need to call the banks and tell them I am retired and ask for an interest rate reduction or a promotional rate. If they push back, talk to a supervisor. It never hurts to ask, and I even suggest calling back again the next day and asking again," McAuliffe says.

If your credit score is solid, you might also lower the cost of your debt through a balance transfer credit card with a 0% interest period up to 21 months. That may be enough time to wipe out or drastically cut your high-interest card debt.

Tayne lists debt consolidation as another option, as long as "there is a way to use income to pay off the debt and not rely on the credit cards to supplement expenses. This works where the consumer can consolidate their debts into a single payment with a lower interest rate, but it's easy to get into debt again if the need for credit cards exists."

Free up cash with a debt management plan

Elevated interest rates and high living costs continue to strain retiree budgets as we head into 2026. A recent AARP study finds that 78% of Americans are worried that Social Security payments won't be enough to cover living expenses in retirement. This is especially true in higher-cost areas, where benefit payments don't go as far. 

This is the reality for many retirees, who find it difficult to make even minimum payments. When staying current on credit card and loan payments isn't possible, it's worth exploring a debt management plan with a nonprofit credit counseling agency to create some breathing room in your budget. The plan may also help retirees protect their assets and their lifestyle in retirement.

"With inflation causing havoc for many, a debt management plan can reduce your monthly outlay, freeing up cash while getting your interest rates reduced to usually single digits," says McAuliffe. "This plan works best for those who are ready to commit to a debt-free lifestyle and giving up those credit cards for good."

"If the debt has become unsustainable, I recommend speaking with a professional, such as a debt relief attorney," Tayne adds. "Debt attorneys and finance professionals are versed in these practices and can help guide consumers in the right direction while still understanding all of their options and rights. This can be especially valuable for retirees facing persistent debt-collector harassment."

The bottom line

With the Federal Reserve expected by some economists to lower rates in 2026, it may be a good time to tackle debt. Lenders may, in turn, be more willing to negotiate with borrowers or offer lower rates on balance transfer cards and consolidation loans.

If you're unable to keep up with your debt payments, a debt management plan may help to lower the interest you're paying and put you on a workable plan to become debt-free. It's important to consider your full debt picture so you can prioritize which debts to pay off and make sure you're not creating problems elsewhere. It's also a good idea to consult your accountant or a professional financial planner who can ensure any moves you're considering align with your goals and overall plan.