www.usatoday.com/usatonline/20020425/4058394s.htm
A sluggish stock market and painfully low interest rates pinch returns on their CDs, bank accounts and stock investments. Tapped out, many in this new generation of seniors turn to credit cards to finance medical bills, expensive prescription drugs and comfortable lifestyles. But debt problems are only likely to become worse as the population ages, bankruptcy experts say. Unlike their parents, Americans retiring now are comfortable with credit cards and debt. They are more likely to use plastic to make up for declining income from savings and investments. As a result, household debt for those 65 and older is skyrocketing -- up 164% on average in eight years, to $20,302 in 2000, according to SRI Consulting Business Intelligence. That compares with a 92% increase for those younger than 65. One national non-profit credit-counseling agency says more seniors are seeking help with ever-more-burdensome debt loads -- about $30,000 on average, nearly double the average client's debt. Most older Americans with debt problems are not spendthrifts, though. Medical emergencies, a major home repair or loans to children or grandchildren often are what push them over the edge. Because many seniors own a home and have good credit records, they have a higher capacity for debt than younger people. The push into bankruptcy Although older Americans account for a small proportion of total personal bankruptcy filings, they are the fastest-growing group in bankruptcy. About 82,000 Americans 65 or older filed for bankruptcy in 2001, up 244% from 1991, according to the Consumer Bankruptcy Project, a study done at Harvard. After $10,000 in credit card debt began to overwhelm her, Jennie Giannone, 72, finally filed for bankruptcy in March. Nearly half of the elderly people who end up in bankruptcy say that they filed because of a medical reason, the Harvard study found. After four surgeries within three years, Duane Allen, 68, and his wife, Linda, had racked up about $15,000 in medical bills. Soon, they were treading water and sought help from a debt-counseling center. As Duane Allen puts it: ''We had health and medical problems and put the bills on our credit cards. Out-of-pocket health care expenses for seniors increased nearly 50% from 1999 to 2001, according to a report by the Commonwealth Fund. The costs are likely to go up as more employers eliminate retiree health benefits, which typically provide supplemental drug coverage. At the same time, many managed care companies are cutting prescription coverage from Medigap policies. That forces many elderly Americans to go without medications or pay for them with a credit card. The desire to help family members also can trigger financial problems. Seniors ''often need someone to tell them that they can't continue to send their son money every month,'' Worley says. Even worse, some family members take advantage of elderly grandparents, aunts or uncles. Five years ago, the Council on Compulsive Gambling of New Jersey set up a senior outreach program because it found that about 10% of its callers were people 55 and older who had gambling problems. Ed Looney, the council's executive director, says one 72-year-old woman told him that she had lost $300,000 on card games and slot machines since 1980. Although there is the perception that many older Americans are affluent, 44% of retirees say Social Security was their primary source of income this year, up from 38% in 2000, according to an annual survey by the Employee Benefit Research Institute. Unplanned expenses When seniors live on a fixed income, it's tough to juggle an unexpected expenditure. The $1,500 bill had to be paid upfront, and that depleted most of her cash reserve. As a result, Barreras and her husband, Fabian, who live on a modest income, had trouble keeping up with other bills. They had to wait until they received their checks from Social Security before they could make credit card payments. Soon, late fees and penalty interest rates caused their credit card balance to balloon to about $27,000. Senior citizens with credit card debt used to be an exception. Today, our clients have an average credit card debt of $8,000. Their homes have appreciated in value, in many cases causing property taxes to become a large financial burden. These older homeowners are frequently targeted by creditors who try to sell them a home-equity loan. For many senior citizens, their only major asset is their home. It becomes a de facto pension, says John Pottow, a bankruptcy expert and recently appointed law professor at the University of Michigan. Although pensions are a protected asset, in most states only a small amount of home equity is protected in bankruptcy. So if the value of the equity exceeds the state exemption, then a person who files for Chapter 7 bankruptcy will lose their home. Seniors don't know their rights Older Americans often compound their debt problems. Many are too embarrassed or too proud to seek help when financial problems arise. They become nervous when bill collectors start badgering them. Though debt problems among the elderly are rising, bankruptcy is usually a last resort. They may take out a loan or go to a food pantry in an effort to get by, she says. To help out, Bourne has set aside areas on Cape Cod where senior citizens can go shell fishing to supplement their food budget with oysters and clams. In the end, debt problems take an emotional toll, not just a financial toll, on older Americans who often suffer in silence.
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