Seniors' Credit Card Debt Rising

Many seniors now owe thousands of dollars on several credit cards. Many are trying to help their families in these difficult economic times. Late fees and higher interest rates are pushing the amount owed up. Their debt has grown but their income has not. As mentioned in a 10/17/09 post, Social Security benefits will not increase in 2010. Increases are based on the Cost of living Allowance (COLA). As the government seems, this stayed static for 2009.

Older Americans are carrying debt loads they can barely handle on their fixed incomes. Homes are devalued and many are turning to "reverse mortgages". In 2007, more that 40% of seniors' income was used towards paying down their debts. This was 12.5% higher than any other age group. Those 65 to 74 years of age (11.2%) are contributing a large portion of their money to credit card debt reduction.

Research has shown that on an average, $4,000 of a senior' s credit card debt is towards medical expenses (prescription drugs, dental and doctor visits).

With the "baby boomers" retiring and the projected insolvency of Medicare in 2017, retirees are not feeling comfortable.

source: The Washington Post

BEWARE of Reverse Mortgages

In retirement you should be able to do all the things that you envisioned while you were working. But for many people this is not happening. No one could have projected the state of the economy for the last few years which probably resulted in much smaller income in "your golden years". As noted in posts of 10/17/09 and 12/26/09, seniors will not be getting an increase in their Social Security benefits in 2010. For the last several decades an increase of 2-3% occurred the first of every benefit year. The Federal Government bases the increase on the Cost of Living Adjustment (COLA) but says there was none this year so benefits will not increase. This will result in more senior credit card debt as has been see in the last several years. An expected increase in reverse mortgages is also anticipated.

A reverse mortgage is a loan against a house's value that is repaid when the borrower dies or sells the property. The number of reverse mortgages issued to seniors in the past three years is more than the total issued from 1990 through 2006.

Consumer advocates have said that this type of mortgage should be used as a last resort because of the high fees incurred. The National Consumer Law Center says often aggressive tactics are used when this option is presented to seniors. According to the U.S. Department of Housing and Development (HUD) there are many "unscrupulous loan officers, mortgage companies and loan counselors" defrauding Americans. Some are selling loans that seem to be HUD-insured reverse mortgages but are not. A home equity line of credit is recommended before taking a reverse mortgage.

source: Parade