Taxes, energy, health costs help increase debt levels of elderly

Debt is chewing up a bigger bite of older Americans' income.

Households headed by people 75 or older saw their debt loads as a percentage of income rise to nearly 8 percent in 2004 from less than 4 percent in 2001, a new study from the Employee Benefit Research Institute shows.


Meanwhile, 61 percent of family heads of household over age 55 carried some debt in 2004, an increase of 7 percentage points since 1992, according the institute's report, which was published this fall. Among households led by a person 75 or older, 40 percent carried debt, up from 32 percent in 1992, the study found, using data from the Federal Reserve's Survey of Consumer Finances.

Aggregate levels of debt also shot up for the over-55 crowd.


Average family debt among those 55 and over, including mortgages, car loans and credit-card debt, rose 76 percent from 1992 to 2004, to $51,791. Among those 75 and older, average debt more than doubled, to $20,234.

Nearly 9 in 10 credit counselors surveyed by the National Consumer Law Center in a September study reported rising numbers of elderly clients in the past five years.

These and other studies pointed to higher property taxes, housing costs, energy prices and out-of-pocket medical expenses as reasons for the mounting debt of seniors.

"Families with the oldest heads took on more housing debt but also had substantial increases in nonhousing debt, becoming the only age group that had higher nonhousing debt payments than housing payments," the study concluded.

For James Barlow, it was a combination of factors.

By his own admission, the 68-year-old Rockford, Ill., man had flitted from job to job over the years, never staying anywhere long enough to build up much money for retirement. He planned on working long past 65.

But in 2004, Barlow, a longtime heavy smoker, was diagnosed with heart problems and had to retire from his job as a package handler for a delivery service. Today, he lives on a small pension, Social Security and income from a newspaper delivery route.

His wife, Mary, 44, who also works for the delivery service, had neck and shoulder problems and has been on disability payments for eight months. She hopes to return to work next month.


The reduced income and their share of their substantial medical costs over the past couple of years, along with rising day-to-day expenses, combined to pile up about $34,000 in credit-card debt, not counting their car and house payments, she said.

"I frittered away a lot moving from one job to another," he said. "I should have done much better saving for retirement, but by the time I realized this, it was too late."

The Barlows enrolled in a debt-payoff program with Family Credit Counseling Service in Rockford that should let them pay off their debts within about five years, assuming Mary is able to go back to work next month.

"Debt has become almost an epidemic for seniors because they're living longer and haven't saved enough to cover those years," said Heidi Berardi, vice president of the Employee Benefit Research Institute.

The EBRI study found that households led by someone 75 or older were paying 7.7 percent of their income toward debt in 2004, up from 3.6 percent in 2001.

Among households headed by someone 55 to 64, average debt payments amounted to 11.6 percent of income, higher than the overall percentage for all age groups, according to the report.


You're never too old to create a financial snapshot, jotting down your retirement income, assets, debts and expenses, Berardi said. The exercise is a practical tool, but it also helps people focus on their true necessities, she said.

If you're struggling with debt but believe you can work through it yourself, begin by contacting creditors directly and asking for help. Many times, they are willing to reduce payments, Berardi said.

If you'd rather work with a credit-counseling agency, choose one that is licensed in your state and is a member of the Better Business Bureau, she said.

More tips on dealing with large debts can be found at the Federal Trade Commission's Web site,, or 1-877-FTC-HELP.

FTC officials warn consumers to scrutinize all debt-management plans. Some have been known to prey on debtors, particularly elderly ones.

Be wary of any organization that asks for large upfront fees, pressures you into making a "voluntary contribution" or enrolls you in a debt payment plan before you've had financial counseling.


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