Your money may be as tight as your skin, but the true gift of your youth is one of the most powerful tools of financial planning: time. If you are a senior in retirement and in debt, however, all you may possess is a feeling of powerlessness as time slips away. Combine that state of mind with the emotions that may have gotten you into debt in the first place, and you’ve created quite the financial quicksand.
Several years ago, Francine Bostick, a now-retired 62-year-old custodial manager in Manhattan, Kan., and her husband, James, 74, found themselves with lots of stuff and more than $120,000 in credit card debt. With easy access to cheap credit, thinking twice about buying a new TV or helping her adult children with their expenses did not happen.
“We thought as long as you could pay” the minimum, “everything was cool,” she said.
But things changed quickly and were cool no more. Her husband developed dementia. Simultaneously, card lenders started raising required minimum payments. Ms. Bostick ended up paying for their groceries and utilities with even more credit. “I was praying and asking God, ‘What do I need to do?’ ”
The number of Americans age 60 and over in debt is alarming. A recent report by the AARP’s Public Policy Institute and the research organization Demos revealed that Americans over the age of 50 carried substantially more debt on credit cards — an average balance of $8,278 — than those under 50, whose average balance was $6,258. The Employee Benefit Research Institute also found recently that total debt payments as a portion of income for families headed by people 75 or older had shot up to 7.1 percent in 2010, from 4.5 percent in 2007.
Much of the credit card debt that older Americans have is tied to medical expenses; however, there’s a tangled and difficult generational psychology going on as well, putting too many seniors at financial risk just at a time when debt should be done with. Amy Traub, a senior policy analyst at Demos, reveals one situation in which emotional ties lead to financial knots. “Nearly a quarter of those aged 50 or above report that they gave money to or paid the debt of relatives, which added to their credit card balance,” she said.
Those apron strings can be like iron bonds. Connie Stone, a certified financial planner with Steppingstone Financial in Chagrin Falls, Ohio, is 55 and works with many retirees and near-retirees who just can’t let go.
“A lot of it is genuine love, and some people find it’s easier to show love through giving material things,” she said. She sees parents who take on all kinds of student loans for their children — even if they’re struggling financially themselves — as well as giving down payments for homes, co-signing on credit cards and paying for $40,000 weddings.
Eleanor Blayney, 61 and a certified financial planner who is consumer advocate at CFP Board, a nonprofit organization that advocates for professional planning, pins it on a confluence of events plaguing her whole generation. “We’re overinvested in our children,” she said. Combine that with the rough job market that young adults find themselves in now and baby boomers being much more comfortable with debt, she said, and the result is “a phenomenon.”
Ms. Bostick’s spending included helping her adult children as well as overcompensating for them. “My daughter was in college and didn’t have medical insurance so I helped her out. Sometimes I bought stuff for my kids they didn’t even ask for.”
Why risk your own future to buy grown-up children things they do not need? “Part of it went back to when they were young,” she said. “We didn’t have much. I felt like I needed to get them stuff to repay them.” The additional need to help with education costs means that many seniors are adding their own slice to the more than $1 trillion in student loan debt. A 2012 report from the New York Federal Reserve found that student loan borrowers aged 60 and over made up 5.3 percent of total borrowers, and 4.8 percent were carrying past-due balances.
Gail Cunningham, 64, vice president of the National Foundation for Credit Counseling, also notes that spending out of loneliness is common in this age group and that the need for a connection can lead to “that feeling of generosity — to a fault.” Requests for help to the nonprofit foundation from borrowers aged 65 and up has risen 4 percent from 2009-11.
Carmen Wong Ulrich is president and co-founder of ALTA Wealth Management.
Article source: http://www.nytimes.com/2013/03/26/your-money/for-older-americans-a-deepening-debt-problem.html?partner=rss&emc=rss