According to research conducted by SRI Consulting Business Intelligence, 34 percent of older households carried debt in 1992 and retirees owed an average of $8000. By 2000 older household’s debt loads had jumped 59 percent and the average owed had risen to $23,000. In 2001 the average credit card balance for seniors 65 and better was $4000, and almost half of all seniors with debt carried credit card balances.
Debt has become a part of everyday life for the general populace and seniors as well. Debt and its related problems have begun to tarnish the retirement dreams of seniors due to fixed incomes, increasing expenses, and higher debt loads.
Drug costs are up 17 percent, medical insurance is up 15 to 25 percent and employer retiree health benefits are being reduced or eliminated. Property taxes are up 10 to 20 percent and homeowner’s insurance is up 13 percent — while overall these expenses are rising at double-digit rates.
Analysts anticipate seniors’
debt growth to continue.
Analysts anticipate seniors’ debt growth to continue as the baby boomers retire, comfortable with debt and not willing to delay gratification. Complicating seniors’ financial picture are low market returns and low interest rates for retirement investments, limiting their ability to draw on these sources for living expenses.
Many seniors find themselves paying high interest and fees for credit, using credit cards for necessities such as prescription drugs, and groceries, attempting to bridge the gap between income and costs. Meanwhile, many seniors and those approaching retirement, are not saving enough to maintain their dreamed-of retirement lifestyles.
Increasingly seniors find themselves with little choice but to consider bankruptcy. While seniors are still the smallest group of bankruptcy filers, the number of seniors finding filing necessary is growing faster than any other segment of the population. They also tend to be deeper in debt by the time they file for bankruptcy—averaging $28,000 in credit card debt alone.
What can be done? Most options are the same for everyone, regardless of age. The basic idea? Slow down on debt.
First overcome your pride and talk about it. Talk about your situation to family, trusted friends or professionals, like Credit Advisors Foundation’s Certified Credit Counselors.
Second, possibly even more difficult, quit giving money to children and grandchildren—you must have your situation under control before helping others.
Third, make a budget. List your expenses and examine income sources. Can you make any adjustments?
Fourth, go easy on your credit cards. If at all possible, stop using them. The biggest problem with plastic is we tend to underestimate the amount of money spent and overestimate our ability to repay it. Don’t forget to look for better deals. Most seniors have had the same credit card for years and there are many more options available now. If you prefer to stay with your current credit card ask for a lower rate. Monitor your credit card spending and pay off monthly. Avoid convenience checks as they carry too many additional fees and charges.
If necessary, investigate programs in your area and request a property tax reduction. Many cities and states offer seniors special considerations.
Check out options to tap into the equity of your home, with either a mortgage or reverse mortgage. While reverse mortgages can be complex and fees and interest rates can be steep, if you are ‘house rich, and cash poor’ this may be a useful option. (Read more about reverse mortgages in the article below).
The biggest problem
with plastic is we tend to
underestimate the money
spent and overestimate
our ability to repay it.
Consider going back to work. Many rules are changing about working and collecting social security benefits—direct questions to the Social Security Administration about your options.
If at all possible, pay major expenses before you retire.
Of course, if you or any senior you know has credit and debt questions, or needs help, call Credit Advisors Foundation immediately. Our certified credit counselors will talk to you about your situation and explain your options for action.
The more you learn, the more informed your choices will be as you make ‘smart’ credit decisions.