Smart Borrower Blog

More Seniors Start the Golden Years in the Red


Dec 22nd, 2010 @ 11:13 PM by Amber Nelson


Most people probably think of retirement as a period of life when the financial obligations hanging over your head fall away. Unfortunately, that is not a very accurate picture for many seniors today.

According to a new survey by nonprofit CESI Debt Solutions, many seniors (54 percent) start their retirement with debt and 96 percent of those with debt at retirement age refused to delay their exodus from the work place.

And now, not only are more than half of seniors retiring with outstanding debts, but more and more are getting into so much debt during retirement that they won’t be able to pay it off before they die. As a result financially-pressed retirees are declaring bankruptcy at a surprising rate.

“Most people are too scared to talk about their financial problems, especially in their ‘golden years,'” says Neil Ellington, executive vice president of CESI as quoted in a Newsweek article. “Retirement is supposed to be all about enjoying the time you’ve been saving up for, [but] the reality is many people couldn’t save enough … The golden years can’t be golden if you’re sinking in a sea of red ink.”

CESI found that roughly 40 percent of retired Americans are not concerned with paying off their debts before they die. And what are they going into debt for? Seventy-five percent of the survey respondents said they used their credit cards to pay for medical or funeral expenses, 39 percent used them to fund vacation and travel, 31 percent used them for entertainment, and 33 percent racked up credit card debt for clothes and jewelry.

“While multiple factors such as health problems and medical debts contribute to elders’ financial distress, the dominant force appears to be overwhelming burdens related to credit cards,” wrote John Pottow, professor of law at the University of Michigan Law School in a study. “Elder debtors carry 50% more credit card debt than younger debtors, and they cite credit card interest and fees as a reason for their bankruptcy filings 50% more frequently.”

And this isn’t simply a product of the Great Recession. Seniors were overstretching their means well before the financial crisis hit. According to Pottow’s study, from 1991 to 2007, bankruptcies among Americans between the ages of 65 and 74 rose by 178 percent. It doesn’t seem possible for these trends to continue for much longer without a consequence for the larger population. Credit card companies do not like losing money for very long!

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

One Response to “More Seniors Start the Golden Years in the Red”

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