DOES DEBT HIT OLDER PEOPLE HARDER?

“Debt is becoming embedded in society, with more people borrowing earlier in their lives and struggling to pay it back until much later … demand for debt advice from the over-60s increased by 15% over the past three years, says the CCCS.” 

 

A blog post in “Guardian Money” last month asked an interesting question: “Who do you think is worse off when it comes to unmanageable debt – the 21-year-old student or the person entering retirement in their 60s?”

Their answer: “You may be surprised to know it is the older age groups – the over-60s contacting the Consumer Credit Counselling Service (CCCS) owe an average of £22,330 on credit cards, personal loans and other unsecured debts.” The post quoted Delroy Corinaldi, Director of External Affairs for CCCS.

The piece attracted lots of responses on the Guardian website. Many of them were critical of the statistical evidence behind the claim but I’m not qualified to judge on that.

I think that many of these responses missed an important point; it was included in the original piece but not given much emphasis. A retiree on a fixed income who finds him- or herself in unmanageable debt has far less future opportunity to rectify the situation than has a 21-year old. Guardian Money put it like this: “older people tend to have far more limited options.”

That debt-ridden retiree might well own their own home: great. The mortgage might have been paid off; better still. But if the worst comes to the worst, they might well lose that home if their debts should force them into bankruptcy. Granted, the debt-ridden 21-year old student is not finding things easy but you’ll find it harder to adjust to straitened circumstances – and harder to face what you might perceive as society’s disapproval of debt – when you are 65-plus.

Guardian Money’s piece goes on as follows (I’ve paraphrased):

___

Living with unmanageable debt is difficult, as anyone who has been through it will tell you. Whether you are 18 or 80, debt problems impact on every area of your life.

For retirees the experience can be especially traumatic. The emotional toll of trying to cope with an endless barrage of letters, phone calls and visits from debt collectors, at a time in life when most people would expect to have gained some financial security, can be immense.

CCCS sees instances of people working long hours in physically demanding jobs well into their 70s, just to keep debts at bay. In many cases this means barely meeting their interest payments.

While younger debtors may be able to increase their incomes or reduce their outgoings, older people tend to have far more limited options. The potentially vast sums of money needed to fund care in older age only adds to this bleak picture.

Calls to the CCCS suggest people are increasingly carrying large amounts of debt with them into later life. Data from the 370,000 people who contacted the service in 2011 shows that demand for debt advice among over-60s increased by 15% over the past three years.

This increase is fuelled by the growing number of older people who find themselves entering retirement with debts built up much earlier in life than their parents’ and grandparents’ generations. And CCCS believes it is witnessing the beginning of a long-term trend. In two years time, it predicts almost half of the people contacting it for help will be over the age of 45, up from just 28% in 2005.

This dramatic shift should worry us all. For today’s generation of older people, seeking free advice early is crucial. CCCS is able to help with free, confidential and sensitive advice and support – but many older people suffer in silence.

Family members have a key role to play. Unfortunately, it is help that they themselves are likely to need in growing numbers in the future.

____

My footnote: in my remarks at the start of this post, I’ve used the word “retirees”, rather than “old people” or “the elderly” or even the more acceptable (to my ears) “seniors”.

I say “retirees” in this context because that’s the issue, not their age. If someone is “no longer economically active” (horrible phrase), i.e. dependent on pensions, then they have little or no influence on their income.

Annuity rates are shockingly low; even if they have the extra flexibility of what we call in the UK a “drawdown” private pension fund, it’s a combination of the markets and the GAD (Government Actuary’s Department) regulations that primarily impact that income (assuming they invested enough in the first place).

 

WANT TO KNOW MORE?

For the “Guardian” blog post: http://www.guardian.co.uk/money/blog/2012/mar/14/debt-plagues-borrowers-into-retirement

For info on “Back to the Black: how to become debt-free and stay that way”:  http://michaelmacmahon.com/2012/02/back-to-the-black-3/

Photo Credit: Public Places via Compfight cc

Leave a Reply

Your email address will not be published. Required fields are marked *