Senior Debt Issues
The idea of retirement is one of easier times, relaxed days and few worries. Unfortunately, for many seniors, the reality is much harsher. The rising cost of living, decreasing retirement funds and unstable pensions mean that many seniors are guaranteed less money in their retirement years than before. This also means that many seniors are facing debt problems that they can't always resolve.
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Medical Bills
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The rising costs of healthcare can often send senior citizens into debt. Trying to keep up with the costs of doctor and hospital visits, as well as the mounting costs of prescription medications, can force some seniors to consider bankruptcy. Unfortunately, because medical bills are not finite, those who seek bankruptcy as a way to help relieve healthcare debt often find themselves in debt again because of the cost of trying to stay healthy. Many seniors use their credit cards to pay their medical bills and end up with huge revolving credit card balances that they can't pay. And when the limits on the credit cards are reached, seniors are left with a huge bill and no way to get their prescriptions. Seniors who need help paying for the cost of healthcare should investigate Medicare and Medicaid options before using retirement funds to pay medical bills.
Credit Cards
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Many seniors use credit cards to pay for daily living and medical expenses. According to CBS News Financial Advisor Ray Martin, seniors who are going into retirement face rising expenses on a fixed income. "When you have pensions that don't go up; Social Security that's increased only by 1.5 percent; medical costs that go up 15 to 20 percent per year; property taxes that go up 10 percent; and there are no savings for an unforeseen expense, what do you turn to? Credit cards." Often, the cycle of debt is repeated as seniors use credit cards to pay for regular expenses, and are then charged interest on what they purchased. In some cases, they use another card to pay off the first one. Seniors -- especially those whose good credit history earns them frequent credit offers-- should resist the urge to get new credit cards. They should also avoid getting a second mortgage or refinancing their homes to pay down credit card debt.
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Life Insurance
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Many seniors have been paying on whole life or permanent life insurance policies for many years. If a senior is cash-strapped, it is better to tap into the life insurance rather than secure another credit card. According to Byron Udell, the founder of AccuQuote, the life insurance policy has a cash value that would be paid out when the policy is cancelled. It is also an investment account that can be borrowed against. The owner of the policy can take up to 96 percent of it out through a "cash-surrender loan," Udell says. Tapping into your life insurance can be a way to solve debt issues without going further into debt, declaring bankruptcy or leaving debts behind when you die.
Housing
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Housing can be among the most pressing issues for seniors. Howard Dvorkin, president and founder of Consolidated Credit Counseling Services, says in an article for "Smart Money" that using your home equity to pay off debt is a bad idea. "I believe a house is something you retire with," he says. "You don't want to be 75 and still making mortgage payments."
A better option might be a reverse mortgage, which essentially converts the equity you have in your home into cash. You can receive the money on a monthly basis or in one lump sum. The money doesn't need to be paid back and you can live in the house for the rest of your life -- or until other arrangements need to be made. You must be age 62 or older or have fully paid off your home to be eligible for this type of transaction, according to "Smart Money." You are essentially selling your home to the bank, which gets the home instead of your children. However, this can be a very real and helpful option for many seniors in need of additional income.
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References
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