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Financial Exhaustion Hitting Many Seniors

Philip Moeller

On paper, consumer price inflation has been tame, personal incomes are modestly higher, and measures of senior poverty are reassuringly low. But in the real world, prices for many consumer items are much higher, especially in poorer neighborhoods without Wal-Marts and other price-conscious retailers. Incomes for many seniors are not rising. And many older households are experiencing what can best be called financial exhaustion.

[See 10 Ways to Boost Your Social Security Checks.]

Many older consumers have scrimped during their retirement years to make ends meet. While they make enough money to avoid poverty, they have never had much of a cushion. Now, with nest eggs depleted and home values still depressed, they are running out of painless financial sacrifices.

ClearPoint Credit Counseling Solutions operates all over the United States and is one of the nation's largest nonprofit counseling agencies. Based on summaries of its counseling work load, rising numbers of seniors are running out of money, and the trend is getting worse.

In 2007, less than 5 percent of the consumers using ClearPoint's credit counseling services were at least 65 years old. At the beginning of this year, the organization reports, more than 13 percent of its clients were seniors.

Further, ClearPoint says, the dominant reason seniors sought counseling in 2007 was to get help with their poor money management and excessive spending. Today, however, the top issue bringing them in for counseling is reduced income.

If the economic recovery is moving ahead, it's doing so very slowly for many older consumers. "Things are starting to get better, but they're not getting there very fast," says Patrick Owens, a ClearPoint counselor in Richmond, Va. "Right now, we seem to see the same situations [with seniors] with rising credit card debts and falling values of their homes."

"They're taking on more unsecured debt," Owens explains. "They know they don't want to rely on their credit cards" but don't see an alternative. "Many of them are not aware of other forms of assistance" that credit agencies can help provide, including help paying utility and medical bills.

[See How to Finance Life Until 100.]

Cynthia Hampton is a ClearPoint counselor in Memphis who sees consumers from Tennessee and nearby parts of Mississippi and Arkansas. "What we're seeing is a substantial increase, from the past five to eight years, of seniors having more debt for a variety of reasons," she says.

"It's getting worse because the cost of living is increasing but the income of seniors is not keeping up," Hampton says. "The middle-income person has just about disappeared, and most of our seniors were in that middle-income bracket."

People often use their recurring Social Security payments and any pension income to pay their fixed bills, she explains. Unable to cover their variable expenses, older people are increasingly putting their food and medical expenses on their credit cards.

"We are seeing people who even have [Medicare]" with a 20 percent co-pay requirement, Hampton says. "They are not able to pay the 20 percent for a hospital stay or a series of doctors' bills for a serious illness ... So it's often a choice of either food or medicine."

Living costs in low-income urban neighborhoods can, ironically, be higher than in the higher-income suburbs. "Some of our clients do not want or are unable to leave their community to shop in one of the big, lower-priced stores," Hampton says.

Loneliness and isolation can also take a financial toll on seniors, particularly widows. "They're lonely but they're afraid to go out because of the high crime rate," she says. "So they amuse themselves with the television remote control" and buy things they can't afford and may not need from the shopping channels.

[See Do You Face 'Money Death' in Old Age?]

Hampton and Owens stressed that seniors should be aware that ClearPoint and other accredited nonprofit counseling agencies can help consumers in several ways:

1. Negotiate lower monthly payments and interest rates with credit card companies. This often can include forgiveness of late fees and other non-purchase charges.

2. Intercede with collection agencies to help take the heat off of people in debt. Typically, the money still needs to be repaid but the time pressure can be reduced.

3. Work with credit rating bureaus to remove black marks from a person's credit rating.

4. Develop repayment plans with doctors, hospitals, and other medical providers.

5. Find payment plans or subsidies from major utilities.

6. Provide housing counseling for people behind on their payments.

7. Work with consumers to build personal budgets and new spending plans that are in balance with their incomes.

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