Joyce and Thomas J. England
of Gainesville, Ga., retired in the early 1990s with a debt load
they thought they could handle. Like many Americans, the Englands
had mortgage and car payments, as well as a couple of small credit
card bills, to pay each month.
But soon afterward, the
Englands’ divorced daughter and her three children moved in
with them. They built — by charging it to a credit card —
an addition onto their home to accommodate the new dwellers. Then
two years ago, Thomas had a car accident that resulted in a blood
clot on his brain and a wave of medical bills. Last year, Joyce’s
93-year-old father, a retired minister, moved in with them.
Whenever someone in the
family needed something, Joyce provided. "If I didn’t
have the cash in my pocket or in my checking account I went to a
credit card," she says. "It was a given."
But earlier this year
the stress of mounting debts became too much to bear. The Englands
had maxed out six credit cards. Bill collectors hounded them asking
about late payments. Joyce couldn’t sleep because of the financial
anxiety she felt. Finding themselves $30,000 in debt, the Englands
turned to a consumer credit company that urged a strategy to stop
the escalating deficit and pay it off. "Now if we can’t
pay cash, we don’t get it," Joyce says.
In addition to caring
for parents or helping out children, thousands of senior citizens
are bearing an added financial burden because of everything from
escalating medical insurance premiums eating into the monthly budget
to company bankruptcies wiping out retirement funds. Subsequently,
the elderly, especially those no longer working, may resort to high-interest
credit card purchases
that push them deep into debt.
"When people take
on debt they make a presumption on the future," Ron Blue, author
of nine books on personal finance from a biblical perspective, told
PE Report. "Certain kinds of debt are never good at any age,
and credit card debt would be one of those."
Blue, whose financial
planning firm is based in Atlanta, says Americans have fallen prey
to a false sense of security because of the tremendous prosperity
of the 1980s and 1990s. Many people made financial decisions using
an "inflationary mentality," assuming that home prices
and pensions would continue
to escalate, he says.
The elderly can be more
vulnerable because they usually are living on a fixed income, according
to Blue, 60. When retired people take on debt it puts their assets,
such as a home and pension, at risk, he says. Some senior citizens
have postponed retirement and instead are selling their home to
find a way to pay for accumulated debts.
William Hunt, an attorney
with Assemblies of God Financial Services Group in Springfield,
Mo., cites a man who quietly racked up so much debt on his credit
cards that his two adult children only learned about the problem
when the father almost lost his home through foreclosure proceedings.
"The inability to control debt can be both embarrassing and
psychologically devastating to seniors," Hunt says.
The average total debt
per household for those 65 and older totaled $20,302 in 2000, a
164 percent increase from 1992, according to SRI Consulting Business
Intelligence. In addition, 82,000 Americans age 65 and up filed
for bankruptcy last year, a 244 percent jump from a decade earlier.
Meanwhile, credit card
companies this year will top the record five billion new mail solicitations
in 2001. This year, the average home is expected to receive more
than 50 credit card offers in the mail.
Cards can be used to
pay for an increasing number of big-purchase items, from monthly
rent to college loan payments, and the average card limit has been
growing in recent years. According to the Gallup Organization, 73
percent of all Americans 65 and older use credit cards. The elderly
carried an average credit card balance of $873 in 2000, compared
to $240 in 1992.
There are other debt
risks. Hunt says cash-strapped elderly homeowners are susceptible
to agreeing to place "reverse mortgages" on their homes.
Although reverse mortgages initially appeal to those who have no
liquid assets because they provide quick cash, Hunt says they often
are a poor stewardship choice.
In processing reverse
mortgages, companies frequently consider unrealistic projected future
values of the home in order to increase the debt load higher than
the owner can handle. Typically, mortgage companies foreclose on
the home shortly after the owner’s death. The family subsequently
must sell it quickly at a loss or lose it through foreclosure.
"In either case,
some or all of the equity in the home is lost both to the family
and, for Christians, to ministry," Hunt says.
Stephen Sparks, national
director of the A/G’s Senior Adult Ministries, says retired
Christians need to be faithful to give back to God, who provides
all financial provision in the first place. "Jesus had more
to say about stewardship than any other subject," Sparks says.
"Jesus had more to say about this subject than He did about
heaven, hell and the Second Coming all put together."
Author Larry Burkett,
board chairman of Crown Financial Ministries in Gainesville, Ga.,
says senior citizens who face tough financial choices may even need
to reach out to family and friends for help.
"Though senior adults
today may not have a lot of cash, they typically do have a good
credit rating and own a home, and are therefore prime candidates
for large amounts of credit," Burkett said on a recent How
to Manage Your Money radio broadcast. "So when a medical
emergency strikes, the solution quite often is to borrow. These
seniors are one generation past the generation that faced the Great
Depression head on, and may have never been forced to be frugal
and handle money properly. And now it’s causing some major
problems."
Burkett, 63, advises
those nearing retirement age to keep unsecured debt to a minimum
and pay off their mortgage. "Plan ahead now for your later
years and then live by your plan," he says. "Although
belt-tightening may not be fun at the moment, it’ll reap great
benefits down the road."
Joyce England says she
wishes she had invested more in a 401(k) plan before taking early
retirement a decade ago. At 69, she is working 25 to 30 hours a
week as a sales associate. Her once-retired husband, now 78, is
delivering newspapers every morning. Joyce figures their debts can
be repaid within five years. "It’s a struggle right now
when it shouldn’t be a struggle," she says.
Sparks encourages seniors
who find themselves in financial difficulty to pray to God for wisdom,
guidance and direction. "And seek advice and counsel from godly
people whose expertise is in the area of finances," Sparks
advises. "Determine to continue to be faithful in your giving
to the Lord and His church. Set a goal to get out of debt as soon
as possible."
