Debt Is a Serious Issue For Many Older Adults
According to the National Council on Aging (NCOA) website, “over 23 million Americans aged 60+ are economically insecure—living at or below 250% of the federal poverty level (FPL) ($28,725 per year for a single person). These older adults struggle each day with rising housing and health care bills, inadequate nutrition, lack of access to transportation, diminished savings, and job loss.” Many older adults who are above the poverty level are also at risk for serious financial problems if they suffer even one major adverse life event, such as a serious medical issue, job loss or fraud. Others are pulled under water by reaching out to help a family member who is at risk of drowning in debt.
The NCOA also reports these sobering statistics:
- One-third of senior households has no money left over each month or is in debt after meeting essential expenses;
- In 2012, the average credit card debt among adults aged 65+ was $9,283;
- 14% of adults aged 65 and over face retirement with negative net worth.
The Consumer Financial Protection Bureau (CFPB), in a May 2014 bulletin, reports that while home ownership by adults 65+ has increased over the previous decades, the amount of mortgage debt has increased even faster. Many have first and second mortgages. This means the amount of home equity enjoyed by older adults has declined. The CFPB concludes that “Decreased home equity wealth is a great concern in light of American increased longevity and lack of financial preparedness for retirement.” Foreclosure rates for older adults increased five-fold from 2007 through 2011 and, although those rates have begun to decline, they revealed how thread-bare the retirement safety net is for many.
Many older adults in these situations do not need to read these statistics to understand the problem. For them, debt problems weigh them down every day and keep them awake at night.
There is help. It comes in many different forms because people are different and so are their debt issues. But in every case there are several key steps to take: honestly look at the situation, get professional advice and take action. Some red flags to look for are: making minimum credit card payments, ignoring bills until next month, having to choose between food, medicine and paying a bill, using a credit card for necessities, or feeling regularly frustrated by bill paying. If you experience any of these or just want to know if you are on the right path, it is time to get professional advice.
One avenue for advice is an attorney knowledgeable in debt management. Some attorneys will provide a free initial consultation. Another avenue is a qualified consumer credit counselor. The National Foundation for Credit Counseling website offers extensive information and resources, including a listing of certified counselors around the country. Until you have received professional advice, you should be very wary of companies offering consolidation loans or credit card debt reductions. Often times these services do not address your whole financial and debt picture and that is important. Often, consolidation loans have high fees and interest rates. Some debt reduction plans will create income tax liability for you. The last thing you need is a greater tax bill.
Like so many challenges, taking the first step is often the hardest part.
If you have questions about debt management or possibly bankruptcy, call us at 610-323-7464.