Seniors are saying, `Put it on the plastic'

Debt: As their expenses rise and savings dwindle, Americans over 65 are racking up crushing charges.

March 17, 2004|By Eileen Ambrose | Eileen Ambrose,SUN STAFF

Cecil and Mary White were in their 50s when health problems forced them to quit work in the 1970s, and as the years passed, their ailments grew along with the costs of their prescription drugs.

By the late 1990s, the Elkridge 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, showed.

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, stated a Demos report, Retiring in the Red. 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 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.

Credit cards have been a source of support for Patricia Whiteman of Forestville after a back injury caused her to quit a data-processing job in the mid-1980s. The 71-year-old racked up about $15,000 in card debt and last year entered a debt repayment program offered by a nonprofit credit counselor. She pays $400 a month, about one-quarter of her income from Social Security and a pension, toward reducing card balances.

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.

Less security

"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."

Also, unions today often face the tough choice of protecting jobs and benefits of current workers or cutting benefits for retirees, Westbrook 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 and 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's 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 doctors, hospital and drug bills on credit cards.

The out-of-pocket cost for one medication 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.

A job loss also frequently derails older workers' finances and retirement plans, experts said.

Dollie Hawkins of Miami retired in her late 60s after the medical clinic where she worked as a clerk closed its doors in 1988. At her age, she said, she couldn't find another job. With no pension, her Social Security checks weren't enough to keep up with living expenses, she said.

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