Older Americans Struggle With Debt Crisis
More people than ever before are entering retirement while still carrying debt, according to data from the Federal Reserve Bank of New York. Debt held by people ages 60 and older has almost doubled, jumping from nearly 13% in 2003 to nearly 23% in 2016. The debt load among older Americans equals about $3 trillion.
This includes medical debt, credit card balances, mortgages, and even student loans. Seniors, who are likely to be living on a fixed income, are struggling to juggle paying off their debt along with their daily expenses – making what should be a happy and relaxing time into a stressful and difficult period.
Michael Sullivan, a personal finance consultant with credit counseling firm Take Charge America, said being in debt forces older folks to make hard decisions. “For many, this means forgoing needed home repairs, missing doctor’s appointments, cutting pills or skipping meals in order to afford a loan payment.”
In order to ease the burden of debt for retirees – and seniors who may still be working – Sullivan recommends the following options:
• Credit counseling. Credit card debt is a big problem among the over-50 set. The AARP reports that people over 50 now carry higher credit card balances than people under 50. This is often caused by using credit cards to cover basic living expenses and medical care. Credit counseling can help people find ways to pay down credit card debt, including transferring balances to a zero-percent balance transfer credit card, which offers a promotional 0% APR for a limited time and allows card holders to pay down their balance without incurring interest fees.
• Home Equity Line Of Credit. The HELOC, as it’s known, offers a lower interest rate than the typical credit card. Borrowers may be able to deduct the interest, as well. This is a loan and will have to be paid back, but is another option if credit card debt is out of control.
• Reverse mortgage. Homeowners ages 62 ad older can convert part of their home equity into tax-free funds, in order to cover living expenses and debt payments. A reverse mortgage counselor can offer more information so folks can determine if this is a good option for them.