Struggling seniors amassing hefty credit debt
By Eileen Ambrose
BALTIMORE SUN
March 29Cecil and Mary White were in their 50s when health problems forced them to quit work in the 1970s, and as years passed their ailments grew along with the costs of their prescription drugs.
By the late 1990s, the Elkridge, Md., couple who survive on Social Security did what millions do when short on cash -- they pulled out the credit cards. They made monthly payments, but the leftover balance with interest climbed to about $14,400 in a few years.
Cecil White, a 77-year-old former truck driver, says the credit cards have been life savers.
"If we hadn't had them, we would have to do without medication," he said. "And I don't know if we would be here."
For many older Americans, retirement isn't so much golden as it is plastic. As housing and health care costs rise while savings and retirement benefits dwindle, seniors are using credit cards to keep up with medical bills or everyday living expenses.
Nearly one-third of cardholders over age 65 carry debt on their cards, a statistic that hasn't budged much over the past decade, according to Federal Reserve data. But the amount of indebtedness has soared.
The average credit card debt reported by those over age 65 in 2001 was $4,041, an 89 percent increase from 1992, a recent analysis of Fed data by Demos, a New York public policy group, shows.
More startling is the rise in debt among the newly retired, ages 65 to 69, whose card balances averaged $5,844, a 217 percent increase over the decade, a Demos report shows. The study adjusted the Fed numbers for inflation.
"People are already having trouble making ends meet as they switch from leaving the labor force and are entering retirement," said Tamara Draut, co-author of the report.
Retirees with annual incomes of $50,000 or more are in better financial shape than a decade ago, and have actually reduced their debt load, Demos found.
But the majority of seniors have incomes under $50,000. And in this group, those that carry card balances have increased their debt burden significantly, Demos said. Roughly one in five with card balances are in "debt hardship," where more than 40 percent of their income goes to debt repayments, including mortgages.
Demos' findings are in line with those by the Consumer Bankruptcy Project, which reported that the fastest rate of bankruptcy growth in 2001 was among those 65 and older.
"Life hasn't become as secure for employees in their 50s and 60s as it used to be," said Jay L. Westbrook, a law professor at the University of Texas who works on the bankruptcy project. "We had an early wave of layoffs. We had early retirement where you take it or leave it, and often it's not a very generous package."
And unions today often face the tough choice of protecting jobs and benefits of current workers or cutting benefits for retirees, Westbrook said.
"Millions of seniors have retired on the assumption that those health benefits are really certain, and they just aren't. They can be cut," he said.
Traditionally, this older generation has been a model of thriftiness, debt aversion and saving. Many experts say those traits are still common. Unlike the generations that follow them that are willing to whip out plastic for even minor purchases, seniors who grew up paying with cash tend to resort to card debt in emergencies, experts said.
For most, the emergency is a medical problem.
That is the case with Ann Fleig of Lakeland, Fla. The 73-year-old's husband suffered from diabetes, osteoporosis and emphysema during the last years of his life. The Fleigs found themselves putting their share of the doctor, hospital and drug bills on credit cards.
The out-of-pocket cost for one medication alone was $154 a month, said Fleig.
"We were making the payments," said Fleig, an executive secretary for a local Girl Scout Council. "We went without other things. Cut back on groceries a little bit. Turned down the air conditioner so it wouldn't run very much. We didn't go anywhere."
Four years ago, as the balances on their 10 cards reached more than $40,000, the Fleigs enrolled in a credit counselor's debt program. Some of the debt was forgiven after her husband's death a year later. Fleig, who had been working part time, returned to a full-time shift, paid off four credit cards, and expects to erase the balance on the last card this year.
Seniors in financial straits often say they wouldn't think of asking their children for help. Some consider finances too private; others say they don't want to burden children, who are struggling to raise their own families.
Sometimes older parents don't divulge money problems out of fear that a child will step in and try to limit their independence, experts said.
More frequently, though, children and grandchildren are the source of seniors' money woes, experts said. Sometimes parents find themselves still supporting middle-aged children, or end up raising their own grandchildren, experts said.
Even when buried in bills, seniors are reluctant to wipe out their debts through bankruptcy.
"There is an especially strong stigma of bankruptcy among that age group. It's not just a financial bankruptcy, but a moral bankruptcy if they take that step," said Gerri Detweiler, founder of DebtConsolidationRx.com in Florida.
The number of bankruptcies filed in 2001 by those 65 and older reached 82,207, more than three times the number a decade earlier. Still, that's just under 6 percent of the 1.45 million personal bankruptcies filed that year.
For the Whites of Elkridge, bankruptcy is unthinkable.
"No way. We like to pay our bills," said Mary White, 80.
The Whites had little savings when poor health forced them to quit working. Mary White held a variety of jobs and never qualified for a pension. Cecil White said his retirement benefits disappeared after his employer went bankrupt in 1973, the year before federal legislation was enacted that protects pensions.
As their card debt mounted, Cecil White told his apartment manager that he might be forced to give up eating because he couldn't keep up with groceries on top of rent and medication. She put them in touch with the Office on Aging in Howard County, Md.
Now the Whites are in a Medicaid waiver program that pays their prescription drug costs, and they receive Meals-on-Wheels. Together, they receive about $1,800 a month in Social Security, with a large chunk of that going toward rent and insurance. But they have managed to whittle their card debt down to about $9,300.
Cecil White said they were surviving well, although it's "a mind-bothering thing" to accept the help. "I never expected other people to take care of me."
The debt woes of older Americans won't easily be cured, experts agree.
"It's only going to get worse, especially as baby boomers start to retire," Draut said. That generation is the first to delay having children, and now they are paying college tuition later in life instead of saving seriously for retirement, she said.
Others suggest financial problems for some seniors might be eased in 2006 when Medicare's prescription drug coverage kicks in.
In the meantime, older Americans continue to struggle.
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