Senior citizens not shying away from debt
By Lucy Lazarony • Bankrate.com

It wasn't so many years ago that seniors who had survived the Depression looked on debt as a deadly disease, something to be avoided if at all possible.

Like the Depression, those days are history.

Fifty-nine percent of older households carried debt in 2000, up from 34 percent in 1992, according to SRI Consulting Business Intelligence in Princeton, N.J.

Older, wiser, poorer?
The amount of debt owed by people 65 or older has skyrocketed in recent years. In 1992, retirees owed an average of $8,000. By 2000, that number had nearly tripled to $23,000.

Today's retirees owe on houses, on cars, on credit cards. Debt-shy, they are not.

"For many people I think it's just part of their lifestyle," says Larry Cohen, director of the Consumer Financial Decisions Group at SRI.

"Debt has become a part of everyday life."

Other seniors simply haven't saved enough for retirement. Almost half of all seniors with debt carry credit card balances.

"It's the old fixed-income syndrome. Things get relatively more expensive every year but your income doesn't go up. So it gets put on the credit cards," says Ginita Wall, a certified financial planner and co-author of Your Next 50 Years: A Completely New Way to Look at How, When and If You Should Retire.

Another key factor is medical expenses. Climbing medical bills have pushed many seniors into the red.

"A lot of seniors are using credit cards to pay for prescriptions and doctor bills, and the balances just tend to keep increasing," says Barbara Tyson, a counselor at Consumer Credit Counseling Service of Palm Beach County and the Treasure Coast.

Senior debt levels are sure to climb even higher when the high-spending baby boomers start to retire.

"The Boomers are extremely comfortable maintaining levels of debt. They've done so throughout most of their adult lives," Cohen says. "They're not good at delayed gratification."

But let's face it: paying high interest credit card rates for 25 years is not a good use of your retirement income. The best advice for seniors with high credit card debt is to stop charging.

Slowing down the debt
"When you find yourself in a hole, the first thing to do is to stop digging," Wall says. "Put yourself on a budget. Tighten your belt."

Chart your expenses. Are there any areas where you can cut back? If so, do it. Pay your minimum credit card payment plus whatever you can spare every single month. Focus on paying down the credit card with the highest interest rate first. This article from Bankrate.com can help you get started.

Shop around for a better credit card deal. Your card issuer would be happy if you continued to pay 17-percent interest for the rest of your life, but you may not have to.

If you've got good credit, there's a good chance you can qualify for a card with a lower rate. This search engine from Bankrate.com can help you search for card deals from issuers from around the country.

Don't be afraid to call your current issuer and ask for a lower rate. It's not as if the terms of your current credit card contract are written in stone. If your issuer won't nudge down your rate, be prepared to transfer your balance to a lower rate card. This Bankrate.com worksheet will show you how.

Take a good hard look at your sources of income. If there's just not enough money coming in, you may want to go back to work for a while. Find a part-time position in a field you enjoy. Use your paychecks to pay down credit card debt and sock away some extra cash.

Until you've got your own financial woes sorted out, it's best to say no when a child asks for money.

Parents are "going to become the problem, not the solution, if they can't pay their own bills," Wall says. "They need to make sure their own needs are taken care of before helping a child or grandchild."

One way to help minimize debt during retirement is to pay for as many big purchases as possible before you retire.

"Is the furnace going to go out? Do you need carpet in the condo in Florida?" says Steve Garrett, a certified financial planner and manager of private client services at A.G. Edwards & Sons.

"If you're smart about it, you'll plan for major expenses when you still have a paycheck."

-- Updated: Nov. 20, 2002