Senior – & Family – Futures Clouded by Debt?

“Debt Hobbles Older Americans” caught my eye in the news today.  Since it was a Wall Street Journal headline, I guess someone did her/his job!  Beneath the headline is a story that was at once dismaying but not a surprise – and which serves notice to the families of seniors that a watchful eye and assistance may be needed.

It it certainly not news that the turmoil in the financial markets and exploding unemployment have more seniors relying earlier in their lives on retirement savings that are smaller than planned — if indeed there are any savings left at all.  What is most dismaying about the WSJ article is the magnitude of debt that seniors are taking with them into what were planned to be non-working years and the implications that debt has for the future elderly population and their families.

Mountainous Mortgages

Spending levels exceeding income has driven all kinds of debt for older Americans, but mortgage debt is especially troubling.  We tend to think of having our mortgages paid off when we retire, but 39% of households in the 60 to 64 age group had primary mortgages and 20% had second mortgages in 2010, both almost double the numbers from 1994.

While Americans over all have focused on reducing debt over the last 4 years, seniors are having more trouble than others digging out.  That debt will certainly have an impact on a population that expects to live ever longer — not to mention those who love and care for them.

Slowing of Savings

Adding to the the mountain of debt more seniors are facing is a reduction in savings, which should be no surprise since much of the debt is driven by spending money we don’t have.  Of course, the double whammy of falling stock markets and low interest rates has resulted in little growth, and even losses, in the savings already in place, including IRAs and 401Ks.

For many seniors we realize the “savings” are in their homes.  Many have planned to sell their homes and use the equity as the heart of their retirement savings.  Falling home prices have not only wiped out much of that savings but in many cases resulted in negative equity that has made it impossible for seniors to sell their homes.  Without the ability to sell, the mortgage becomes a continuing drain, keeping many working well beyond the time they had planned to relax.

Time for Families to Talk Money

I suspect many families of seniors in the position described above will be surprised to learn of the situation.  After all, parents typically don’t discuss such issues with their children and grandchildren.  It is time to raise this issue!

It will be hard for many seniors to admit they have dug themselves a hole and need help, especially to children and grandchildren.  In fact, senior couples may not even discuss it themselves, with only the “money manager” partner aware of the situation.  It will be harder still to admit that help is needed, but that may be the case.  Getting the situation out in the open will not only help family members provide advice in dealing with it now, but also help those family members plan ahead for financial assistance that may be needed in the future.

The first step to solving a problem is understanding the problem, so that is where we start with our senior loved ones and their finances.

Have you had this discussion in your family yet?  If so, we’d love to hear your experience so we can all learn!