Seniors struggle under increasing debt loadHealth care bills a leading factor for graying Americans
BALTIMORE – Norman Harvel is growing old under a mountain of debt. At 60, Harvel faces medical and credit card bills topping $80,000.
By: Hanah Cho, The Baltimore Sun, INFORUM
BALTIMORE – Norman Harvel is growing old under a mountain of debt.
At 60, Harvel faces medical and credit card bills topping $80,000. Yet Harvel is unable to work, having been injured at a job site more than a decade ago. The former building maintenance worker now lives on $904 a month in Social Security disability benefits.
“I was so sick and tired of getting the bills, so I would throw them away,” Harvel said from his tiny basement apartment in Dundalk, Md. “I’ve had to try to tell myself that it’s something I will wake up from.”
Across the country, baby boomers and other older Americans are drowning in debt, say credit counselors, elder law attorneys and economists.
“It’s supposed to be the golden years, but it’s not, at least financially,” said Nicholas Del Pizzo III, a Dundalk attorney whose clients include many financially struggling seniors seeking bankruptcy help.
From 1992 to 2007, the percentage of households of people in their mid-50s and older with housing and consumer debt rose from 53.8 percent to 63 percent, according to the Washington-based Employee Benefit Research Institute’s research using government data. The problem is even more acute for those 55 to 64, with 81.7 percent carrying debt.
In the same period, the average overall debt for these 55-and-older households more than doubled, to $70,370, according to EBRI.
In Harvel’s case, he piled up debt over years of taking care of his sick wife, Loretta, who died last year at 63. She had diabetes, was on dialysis and required two open-heart surgeries, Harvel said.
Health care bills are a leading factor contributing to the indebtedness of graying Americans.
Workers are paying more for employer-sponsored health insurance, while costs for medical care are skyrocketing. Eligibility for Medicare doesn’t begin until age 65, and it does not cover such expenses as hearing aids, dental care and long-term nursing care.
Meanwhile, more older homeowners are carrying mortgage debt into retirement. Making matters worse, declining housing values have cut into what had been a safety net for older Americans and retirees: their homes.
Some older consumers also are saddled with credit card debt. Among Americans 65 and older, for instance, the average amount of credit card debt rose to $10,235 in 2008 from $8,138 three years earlier, the largest percentage increase among all age groups, according to a survey by Demos, a New York-based public policy institute.
Moreover, other older Americans are haunted by student loans years after they, or their children, left school. Adults 50 and older owe 17 percent of the nation’s $870 billion in student-loan debt, according to a March report by the Federal Reserve Bank of New York.
The financial crisis also depleted savings and retirement accounts, contributing to a “perfect storm” of precarious finances among older Americans, said Marceline White, executive director of Maryland Consumer Rights Coalition.
One illness or emergency can throw a senior into debt, White said.
“If everything goes perfectly, they could manage,” she said. “If something goes wrong, something unexpected happens, they don’t have the liquidity to move on.”
While recent government data shows declining consumer debt as families cut back on spending and saved more money, not all older Americans can follow suit. Not only are most older Americans past their prime earning years, but many must dip into their savings to stay on top of bills – while those still working may make less than they did in previous years.
Low-income seniors with excessive debt are having a hard time digging out in an environment in which “job growth is slow and salary increases are minimal,” said Craig Copeland, a senior research associate at EBRI, who wrote the study on debt among the elderly.
David Jones, president of the Association of Independent Consumer Credit Counseling Agencies, said debtors age 60 and older now represent the fastest-growing segment seeking help at member offices across the country.
The trend has been especially evident in the past two years, a period in which the eldest of the baby boomers began retiring, Jones said.
“There were a lot of people in this population that decided to retire without the same kind of assets that previous retirees had,” he said. “In fact, we began to see people with $60,000 in nonmortgage debt.”
In general, the association said, the average client at its nonprofit local credit counseling agencies has gotten older: 44.5 in 2011 versus 41 in 2007. The average client also was middle class and seeking help for reasons such as a job loss, reflecting the aftermath of the financial crisis, Jones said.
While some older Americans are able to delay retirement, not all can. Unable to find work or other sources of money, many seniors can’t manage their debt on a fixed income.
“These people don’t have the same options that others do,” Jones said. “They can’t in many cases find a job, and if they do, they have to work at a job at a lot less money than they’re used to.”
Bankruptcy filings among seniors have risen markedly in recent years, according to recent studies. In general, the median age of people filing for bankruptcy has risen, to age 43 in 2007 from 36.5 in 1991, according to research published last year by John A. E. Pottow, a law professor at the University of Michigan.
Harvel expressed a mix of guilt and remorse for racking up so much debt but said he simply does not have the means to pay it off.
A bankruptcy, Harvel said, would give him a fresh start and peace of mind. After Harvel put away about $200 to pay for bankruptcy in recent months, Del Pizzo, the Dundalk lawyer, agreed recently to file the paperwork pro bono.
“Maybe I’ll start seeing a little bit of sunlight,” Harvel said.
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