Silence is not Golden: the Elderly and Debt

At some point in your working career you began preparing for the day you will retire. Not only are you looking forward to retirement, but you also began to dream about how your life will be without the daily routine of going to work. Retirement takes preparation, but no amount of preparing can prepare a retiree for unforeseen circumstances that may place them in debt. 

Among elders, bankruptcy is becoming the fastest growing trend among this particular segment of society.  Elders are filing bankruptcy in record numbers due to credit card debt, medical and pharmaceutical costs, property taxes and other living expenses. The elderly are seen as protecting their independence and decreasing the likelihood of becoming a burden to their families if they remain silent about being in debt and not really having the means to get out of debt during their lifetime. This article will discuss what causes elderly debt and what can be done about it.

One of the biggest causes of elderly debt is medical expenses. About 90% of elders rely solely on social security as their only source of income. With a 1.5% cost of living raise versus a 15-20% increase in medical costs, it becomes a problem for elders to be able to pay medical and pharmacy bills. Unfortunately, their savings may not be able to take the hit and credit cards become the only way to make purchases.

Credit card debt becomes a factor because if the elder’s savings is depleted, credit cards become the cash that’s needed to pay off medical expenses. However, rising interest rates, minimum payments and a fixed income working together sometimes makes it difficult for elders to make ends meet.  Credit card debt begins to spiral out of control and the elderly can run out of options to choose from to alleviate their increasing balances.   

Some elders are still paying a mortgage after retirement, in addition to other living expenses, such as food, property taxes and home maintenance costs. These types of expenses add up for the elderly and if their savings account has already been tapped, again the only recourse is the use of credit or securing a loan. If the senior is living in their home, foreclosure becomes an issue and at this point bankruptcy may become something to consider.   

There are alternatives to filing bankruptcy. These options include taking advantage of community or state financed programs for the elderly.  For example, energy assistance with electricity costs, applying for lower property taxes based on senior citizen status, medical and drug discount cards or clubs. Additionally, elders could obtain a reverse mortgage. You must have the equity in your house in order to make full use of this type of mortgage loan. Elders should keep in mind all reverse mortgages are not alike. Last, it might be a good idea to first seek out the advice of a credit counselor or debt negotiator before entertaining foreclosure or bankruptcy. 

Baby boomers are nearing retirement and are seen as being comfortable using debt as a financial tool. However, caution is given because without careful planning and saving because baby boomers could be in the same debt situation as the older generation. Health issues and other expenses that may lead to debt is something where you can’t accurately predict the outcome. It’s best to have a plan with some well thought out options in case there are issues that crop up which may have a long term affect on your financial status.  

Bankruptcy filings for seniors 65 and over increased 150% from 1991 to 2007. The most startling rise occurred among seniors in the 75 to 84 age bracket.  Visit my website for more debt management information and sign up for my free newsletter and e-book.