Crushing Old-Age Debt

These older people just keep getting into trouble! Glad I'm not in their shoes. I'm almost 54! I have forever to pay down my crushing debts!:

A growing number of Americans age 55 and older have put their retirement dreams on hold as they face a dismal financial reality: The recession has forced many into unemployment, stripped away years of their savings or dramatically reduced incomes during what they had hoped would be their final high-earning years.

...Even before the recession, older Americans were piling on debt. From 2000 to 2008, the average debt for households headed by people 55 or older nearly doubled to $66,000, according to Strategic Business Insights, a consumer behavior research firm.

The ranks of older bankruptcy filers also have been swelling rapidly. From 1991 to 2007, bankruptcy filings by those 65 and older increased by 150%, while filings in the 75-to-84 age group soared 433%, according to the Consumer Bankruptcy Project.

Older Americans are staggering under debt because of a variety of problems — from unexpected job losses late in life and underemployment to overwhelming medical bills and providing financial help to their children and grandchildren, analysts say. Making the issue even more serious: They have little time to climb out of debt, says Matthew Beatman, bankruptcy lawyer at Zeisler & Zeisler in Bridgeport, Conn.

...More than two-thirds of older Americans who have filed for bankruptcy say credit cards are the reason, according to "The Rise in Elder Bankruptcy Filings and the Failure of U.S. Bankruptcy Law," a study released in August by John Pottow, a professor of law at the University of Michigan Law School.

Although young Americans grew up in a world of easy credit, older bankruptcy filers have 50% more credit card debt, according to Pottow's study. The median credit card debt of older bankruptcy filers in 2007 was $22,562, compared with $13,615 for younger filers, the study said.

...Many elderly couples offer their children or grandchildren financial aid, even when it's to their own detriment, says Christina Davitt, a bankruptcy lawyer in Wenatchee, Wash.

...Also, many parents in their 50s and 60s are supporting children who have graduated from college and haven't found jobs. "Quite a few individuals still pay for their kids' apartment rental and car insurance," Grogg says. As a result, they don't have as much to save for their retirement, or have used their emergency savings accounts.

...Among the senior bankruptcy filers, 39.1% said a medical problem of the debtor or spouse was the reason, while 32.5% said that medical bills were the cause, Pottow said in congressional testimony last year. And 30.2% said that they had incurred more than $5,000 or 10% of their annual income in out-of-pocket medical bills.

When unable to pay for rising medical bills, debtors can use credit cards, complicating the issues even more. There may be better ways to cope with problems than credit cards, financial experts say. For example, they may be able to get a low-interest loan from a credit union or ask for assistance from family or friends. But it's possible that they prefer the anonymity of credit cards, Pottow says.

...Like Cirinos, many have been willing to use their retirement savings to pay down debt. But that's a bad idea, experts say. With very limited exceptions, retirement money is beyond the reach of creditors, attorney Buckingham says.

Besides relying on credit cards, Froehlich used her retirement savings to delay the inevitable. Her bankruptcy was completed in July, and her credit card debt has been wiped out. But her retirement money has been depleted, and she now has to keep working much longer.