By: Sharane Gott
September 11, 2013
According to some reports, the number of Americans age 60 and older in debt is alarming. A recent report by a national older Americans organization revealed Americans over 50 carried substantially more debt on credit cards with an average balance of about $8,000. As the baby boomers age, so does America, with much of the credit card debt that older Americans face frequently tied to medical expenses.
Just about the time many older Americans think life will be easier, too many seniors are at financial risk.
The Better Business Bureau of Acadiana is frequently asked by seniors about consolidation loans or other credit remedies. What can you do? Seniors certainly aren't powerless. It begins with a plan. Plan for retirement and what is important to you. Bad financial choices shouldn't come from guilt from helping family members, which frequently occurs with seniors.
Mortgages and credit card debt, along with the financial needs of older children and even sometimes elderly parents, are taking a heavy toll on some baby boomers and older retirees. Even though older Americans are working longer than ever, nearly half of boomers expect to retire with debt, according to a recent survey by a national investment company.
People 55 and older accounted for more than 28 percent of bankruptcy filers in 2011, up from 22.9 percent in 2008, according to the Institute for Financial Literacy, a nonprofit education organization.
According to the Administration on Aging, the major sources of income as reported by older persons in 2008 were Social Security (reported by 87 percent of older persons), income from assets (reported by 54 percent), private pensions (reported by 28 percent), government employee pensions (reported by 14 percent) and earnings (reported by 25 percent).
The Better Business Bureau of Acadiana receives phone calls every day from local consumers about credit card debt and consolidation of loans, often from seniors in the area. In years past, older people often found it easy to borrow their way out of a tight financial spot. They often used a home equity line of credit to pay off high-interest debt.
With emergency funds depleted, fixed pensions and little time to recover from market ups and downs, many retirees end up charging basic living expenses on credit cards. To make matters worse, often lonely and financially strapped seniors are targets for mortgage modification scams, pricey loans sometimes pitched as bank "overdraft protection," "credit repair" and "debt settlement" programs that in some cases only dig consumers into a deeper hole.
Credit card debt is often something that sneaks up on many consumers of all ages. Many ask the Better Business Bureau if debt consolidation is the answer.
Generally, debt consolidation consists of a third party consulting with you on your debt. A debt consolidator will negotiate a payment plan for your outstanding debts with your creditors, and you will make regular payments to the debt consolidator for disbursal among those creditors. The Better Business Bureau advises reputable consolidators will advise you on managing a budget so that you can avoid problems in the future.
Companies claiming to help you with budget problems may offer other services such as credit repair, secured credit cards, or mortgage reduction. Credit repair services involve the company disputing information on your credit report that may be inaccurate or outdated (keep in mind that timely, accurate information cannot be removed).
Secured credit cards are cards that require a deposit; they can be useful for those with budget and credit problems who could not otherwise obtain a credit card. Mortgage reduction entails the company arranging refinancing or a payment plan where you pay your mortgage biweekly instead of monthly.
More and more Americans are stumbling through their final working years carrying a heavy debt burden. Those hoping for a long and happy retirement need to find a way to lighten the load with planning for the future now.