A long shadow is accompanying some older adults as they head into what should be their golden years. Unmanageable debt, rare among seniors just a generation ago, has become more common, destroying nest eggs, delaying retirement and fracturing relationships.
A new report by the Employee Benefit Research Institute found that 65 percent of households headed by an adult 55 and older were carrying debt. That number is 10 percentage points higher than it was in 1992. Much of the higher level was because of housing debt: Many older adults refinanced during the boom years 10 years ago. They may have lowered their monthly mortgage payments, but they often extended the length of their loan and are carrying mortgage payments past retirement age. Some of the debt was also driven by credit-card purchases.
And a separate report by the congressional Government Accountability Office found that one type of debt virtually unheard of for seniors years ago is crippling some older adults today. For example, adults ages 65-74 had a higher percentage of student loans in default than younger borrowers. The GAO noted that the loans were taken out for a variety of reasons, ranging from adults going back to school in midlife to Parent PLUS loans taken out for children and grandchildren.
"I see people in their 60s and 70s paying Parent PLUS loans for kids who are now in their 40s," says Leslie Tayne, author of "Life & Debt" (Gateway Bridge Press, $13). "And their kids cannot or will not contribute to paying that debt."
Tayne, a Melville-based debt-resolution lawyer, says older adults also get into trouble because they overspend on credit-card purchases and then face substantial monthly interest charges when they can't pay it off the balance in full. "People refinance their house to shave a quarter point off, but why would you spend on credit cards 18 percent extra for your day-to-day expenses?" she says.
She tells of one older client who had 23 credit cards and ran up substantial amounts in part because she splurged on her grandchildren. Tayne says grandparents should never give their grandchildren carte blanche with a credit card. Instead, when you take your grandchildren shopping, give them an amount you can afford in cash, whether it's $10 or $20 or $100. "It's a great way to teach them about spending and budgeting, and it also limits your exposure," Tayne says. "It's not about saying no, it's about setting limits so you don't end up a client."