Using credit cards to make ends meet in retirement has resulted in an increase in seniors having financial troubles and more seeking bankruptcy protection. In 1999, seniors comprised 12.6% of the population. By 2030, that number will jump to 20%, or 84 million senior citizen,s and is expected to remain at high levels through 2050. Senior retirees are taking on credit card debt faster than any other U.S. demographic group. Easily outpacing the general population, credit card debt increased a mind-boggling 149% for retirement households of people 65 years and older between 1995 and 2004, and 26% since 2005, easily outpacing the overall population. The average credit card balance for people 65 and older is nearly $6,000, overall debt is more than $10,000. Though the credit card debt that the average senior citizen holds is almost half the debt that the average American carries, it still has serious consequences on their ability to get financed.
Struggling to Pay the Bills
A study by Demos, a New York-based think tank, found that consumers approaching retirement age are spending an average of one-third of their income on debt payments. Thirty percent of retirees describe their debt as a problem because of restricted, fixed income, shrinking retirement benefits and devalued housing. Some are impacted by the decision to have children later in life who continue to pay for their kids’ college education even as they navigate through midlife into their late 50’s and early 60’s. Others have become caretakers of aging, dependent parents.
Seventy-nine million baby boomers are carrying “debt loads that their parents would not have considered,” says Sally Hurme of AARP, the advocacy group for people 50 and older. “This does not bode well for financial health.” Much of that credit card spending went toward health care. With medical costs increasing, people living longer and fixed incomes, seniors are finding it difficult to afford medical insurance and expenses. Living on a fixed income, many seniors struggle to cope with everyday and unexpected expenses, aggravated by inflation and rising costs.
Options to Make Ends Meet
- Like many areas of life, planning ahead will help insure a comfortable future. Speak with a financial advisor and begin investing in stocks, bonds, retirement and savings accounts. Don’t compromise the action plan.
- Have an available nest egg set aside for emergency. This eliminates the need to use credit for unexpected situations.
- Consider borrowing at a lower interest rate rather than using a credit card.
- For debt relief, find a reputable counselor to help you manage your finances.
Part-time work or taking out a reverse mortgage may be helpful toward working out your debt problems. If you’re struggling with debt but believe you can work it yourself, begin by making direct contact with your creditors who want to help and often will reduce your payments. If you’d rather work with a credit-counseling agency, choose one that is licensed in your state and is a member of the Better Business Bureau. More tips on dealing with large debts can be found at the Federal Trade Commission’s Web site, www.ftc.gov/credit, or 1-877-FTC-HELP.
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