Debt consumes senior citizens in retirement

CHICAGO | Retirement is no longer the debt-free zone it used to be.

Rising health care and energy costs and the phasing out of traditional pensions have been making that widely sought goal tougher to reach for some time. Now the recession and market slide have compounded the challenge, taking giant chunks out of home values, stock portfolios and job opportunities for older workers.

Zero debt is hardly a must. Some retirees are content paying off mortgages they have well under control. Others like using credit to buy investment real estate for a second home, or a houseboat, or charge a special trip.

But all the additional cost burdens provide an emphatic reminder that, generally, the less debt the better for seniors living on limited fixed incomes.

A sobering example of what can happen when crushing debt overwhelms can be found in a poignant scene that plays out all too often at counseling offices in such places as Rapid City, S.D.

Women in their 70s and 80s, sometimes on walkers, show up for their required counseling sessions regularly at the Consumer Credit Counseling Service of the Black Hills as they prepare to file for bankruptcy.

Debt adviser Terry Mills says hundreds of retirees have gone that route since 2005, making them by far the biggest demographic group. Most had limited assets to deal with their medical bills.

“It’s very sad,” said Mr. Mills, the agency’s education and community outreach manager. “They worked their whole lives, and here they come and they have to file bankruptcy — this is how you end your life. It just tears your heart out when people come in here on walkers.”

Americans 55 and older have been the largest age group to file for bankruptcy recently, accounting for 23 percent of the more than 1 million filings in 2007, according to the AARP. Older seniors are even more vulnerable, with bankruptcy more than quadrupling for those ages 75 to 84.

Even aside from the last resort of bankruptcy, the level of mortgage and credit card debt among retirees is worrisome.

Forty-three percent of people ages 65 to 74 had a mortgage in 2007, carrying median housing debt of $69,000, according to government data compiled by the Employee Benefit Research Institute. That was up sharply from 32 percent in 2004 and 18 percent in 1992.

Credit card debt is an increasing problem for seniors with limited or modest resources. A study of low- and middle-income households by the New York think tank Demos last year found that credit card debt had risen 26 percent among those 65 and older since 2005. The respondents in that age group reported an average of $4,000 of credit card debt for medical expenses alone.

Those who thought they had built up a comfortable level of assets for retirement are feeling the squeeze, too.

Ginnie Curran, 65, a retired teacher from San Diego, always expected to be debt-free in retirement. As she prepared to retire in 2003, she envisioned annual trips to New York for Broadway shows and to Hawaii, even sometimes paying for her son and daughter to accompany her.

But unforeseen circumstances have chipped away at her money and added to her debt.

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