Seniors' Debt on the Rise
October 16, 2009
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A recent article in the Washington Post discussed the fact that seniors have been among the most vulnerable Americans during the recent recession. Many have been carrying debt that they cannot handle because of decreasing retirement savings, devalued homes, and their fixed incomes. Their generation had been considered more financially responsible than those who followed them. Seniors 65 years of age and older have not commonly, frequently, or frivolously used credit cards, because credit was not as easily available in their formative years. Now, they are finding themselves in the position of having to borrow money to make ends meet.
An 80-year-old woman profiled in the article owes more than $10,000 to four credit card companies and more than $7,000 to a credit union. She cannot provide exact figures because she is not sure exactly how much she owes. With higher interest rates and late fees, the amount this woman owes keeps climbing, while her income does not. She receives around $2,000 per month in income, but her rent alone is $955; she does not know if she will ever pay down her debts.
Among low- and middle-income Americans 65 years of age and older, average credit card debt reached $10,235 for those carrying a balance for more than three months. This is a 26 % increase from 2005, according to a study by the public policy group Demos; this was the fastest increase of any age group. The percentage of 55 to 64 year olds who had to use more than 40 % of their income toward paying down debt was 12.5 % in 2007, the most recent year for which figures are available, according to the Employee Benefit Research Institute. Eleven-and-a-half percent of seniors aged 65 to 74 contributed 40 % or more toward their debt.
According to the Demos study, $4,000 of a senior’s credit card debt covered medical expenses, including dental expenses, doctor visits, and prescription drugs. Rising medical costs and insurance plans that are less generous impact retirees and those nearing retirement. Those aged 50 to 64 had almost $2,000 in credit card debt caused by medical expenses. Demos associate director of research and policy, Jose Garcia, stated, “Some of these older Americans are picking up the brunt of this recession. Some of them were maybe relying on their home equities for retirements. Their pensions have gone down. Making it through the week becomes an issue.”
There are several avenues for seniors in debt. First, call the credit card issuer to ask for a lower interest rate, lower minimum payment, or other payment plan. They can seek help from a credit card counseling agency, but check first with the Better Business Bureau, the state attorney general’s office, and local consumer protection agencies. Seniors should meet with an elder law attorney to thoroughly, review their estate and financial plans, and either try to avoid debt in the first place or develop alternatives to conquer debt.
Oast & Hook’s attorneys are available to assist clients and their families with integrated planning services, including estate, financial, insurance and long-term care planning.
O&H: Allie, do you have some tips for pet families to help tame spending?
Allie: Sure! A recent article in Real Simple magazine listed some helpful tips. If you have your pets groomed, then groom them midweek. Friday through Monday is the busiest time at pet salons. Many charge 20% less for midweek appointments. Pay attention to changes in your pet’s routine; these changes may signal health problems that can best be treated early, rather than later requiring hospitalization and a big bill. Don’t skimp on food – cheaper brands may have harmful preservatives that can cause allergies. The first two ingredients should be animal proteins, and not by-products, grains, or vegetables. The cost can run to $1 a pound versus 50 cents a pound for lower-quality food, but you will save in the end. Adopt a pet rather than purchase one from a breeder; instead of paying $1000 or more to purchase a pet, donate $100 or so to a shelter for a pet that has been vaccinated and spayed or neutered. Finally, consider pet insurance, especially for a younger pet. The monthly premiums can translate into major savings, because some ailments can cost thousands of dollars to treat. That’s it for now. I see more leaves falling from the trees, and it’s cool outside. Time for a nap at my favorite window!
Oast & Hook will hold its quarterly Social Workers and Administrators Breakfast on November 19th at the Russell Memorial Library, 2808 Taylor Road Chesapeake, Virginia. Registration beings at 9:15 a.m. and the presentation begins at 9:30 a.m. Questions will be answered from 10:30 a.m. to 11:00 a.m. The breakfast is designed to be both a networking opportunity and also an educational opportunity for area professionals who work with seniors, the disabled, and their families. Seats are limited, so please register early. To register for this breakfast, please phone Linda Gerber at 757-967-9704.
Oast & Hook is sponsoring a “Shred Day” from 9:00 a.m. to noon, Saturday, November 14th. Stealth Shredding will park one of its trucks at Oast & Hook’s Virginia Beach office, and you will be able to bring your personal records to be shredded at no cost. If you have any questions or comments about Oast & Hook’s November 14th Shred Day, then please phone Linda Gerber at 757-967-9704.
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