Credit-card debt sneaking up on seniors

By Eileen Alt Powell
Associated Press

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Good money management tips 1. Track your income and expenses and create a filing system for financial documents. 2. Develop a household budget. Online budgeting tools such as offered at dallasfed.org can help. 3. Reconcile your checkbook and ATM withdrawals each month. 5. Compare credit card offers and pay more than the monthly minimum. 6. Set a limit on credit card charges and avoid spur-of-the-moment purchases. 7. If your credit charges are getting out of control, cut up your cards and pay with cash. 8. Set savings goals (use the Federal Reserve Bank's worksheet at chicagofed.org) and save regularly. 9. Scout for the best interest rates for savings accounts at bankrate.com. 10. Calculate how much you need to retire. Use the online calculators at money.cnn.com or choosetosave.org. For more tips and a test of your money management skills, go to aarp.org. Source: AARP

Yet an increasing number of older Americans find themselves deep in credit card debt or even filing for bankruptcy — troubles more associated with their baby boomer children and their grandchildren.

The reasons vary, but experts say some retirees are overwhelmed by rising medical expenses or find that Social Security and their pensions don't stretch far enough. Those who lost jobs before they were ready to retire never quite caught up.

And seniors also have succumbed to the siren song of easy credit.

That's what Dale Gravelle, a 67-year-old nurse in Attleboro, Mass., says happened to her.

Gravelle said she used to pay cash for everything but then started using credit cards.

"I had too many cards, and I got in deeper than I thought," she said. "I kept paying, but the interest was so much. I just got overwhelmed."

After creditors started calling her, sometimes two or three times a week, she went to a nonprofit counseling agency, Consolidated Credit Counseling Services Inc. of Fort Lauderdale, Fla., to work out a plan to pay off her debt.

The rapidly rising cost of healthcare and medications is also clobbering some seniors.

Stuart D. Zimring, president of the National Academy of Elder Law Attorneys, said he's seeing more older couples who get into financial problems because "cash flow is not keeping pace with the cost of living, particularly the cost of healthcare."

And because seniors are proud and protective of their independence, they often try to hide their financial distress from their families.

"In most cases, the kids don't know what's happening until the crisis occurs," said Zimring, whose practice is in North Hollywood, Calif.

A study by Harvard University's Consumer Bankruptcy Project found that the actual number of seniors filing for bankruptcy is still quite small. In 2001, just 82,207 bankruptcy petitioners — or 4.6 percent of the total 1.8 million — were 65 and older, the study found.

Still, it was the fastest growing group of petitioners, the Harvard study said.

A separate study by Demos, a New York-based think tank, found that seniors over age 65 were carrying an average of $4,041 in credit card debt in 2001, nearly double the amount reported by seniors 10 years earlier.

The Demos analysis of Federal Reserve data also found that the newly retired — those 65 to 69 — were carrying nearly $6,000 on their cards, triple the level of a decade earlier.

Tamara Draut, director of the economic opportunity program at Demos, blames "weakening of the three-legged stool" that elders are supposed to rely on — Social Security, pensions and private savings.

Seniors often find their Social Security income reduced when a spouse dies. Fewer workers get traditional pensions, and may retirees have seen companies cut back their pensions or health-care coverage. Savings, meanwhile, took a hit during the 2000-02 bear market on Wall Street or weren't large enough to begin with.

"So it's not surprising that seniors are increasingly using borrowing to cover their needs," Draut said.

Howard Dvorkin, president of Consolidated Credit, said he's seeing an increasing number of seniors with debt problems.

"They are not people with lavish lifestyles, they're trying to live within their means," he said. "But Social Security isn't cutting it for most folks."