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Seniors can avoid getting into credit-card debt

Almost one-third of retirees describe credit-card payments as a “hardship.” “Today’”financial editor Jean Chatzky offers advice on controlling debt.

As if seniors didn’t have enough to worry about, the average credit-card debt for consumers ages 65 to 69 skyrocketed more than 200 percent from 1992 to 2001.

It now tips the scales at nearly $6,000, according to stats compiled for a recent National Consumer Law Center report. The debt is taking a toll, with almost one-third of retirees describing it as a “hardship,” notes the report. “Older consumers still have less credit-card debt than younger consumers,” says Deanne Loonin, the report’s principal author and a NCLC staff attorney. But they are catching up, and the consequences are greater.

“They have fewer working years left to get themselves out of the debt hole. A lot of the solutions for debt trouble include ways to increase income and tap assets, but when you are already retired or close to retirement, those things are much more difficult.”

What’s an already strapped senior to do?

  • Understand credit. The fact that creditors are pushing elders to borrow beyond their means is one of the top causes of the increased debt, according to the report.

    Older Americans in particular are often not as financially savvy about credit. They may not understand how even one mishap can create a downward spiral of late fees and increased interest rates. “Seniors need to more proactively educate themselves about credit cards and their finances,” says Kay Conheady, a financial planner in Rochester, N.Y.

    She suggests you begin by reading the Schumer Box, which each credit card application must include. This box explains the specifics of your card, such as the default interest rate, credit limit and late fee. You can research credit cards and issues on the Internet at sites such as Many public school districts and other local non-profits hold financial workshops for all age groups as well.

  • Retire with a plan. Absolutely do not — do not! — retire without creating a plan that has gotten some outside validation.

    Your plan will determine such factors as at what age you can retire and what other goals you should accomplish first, says Conheady. It must include a budget that has you living within your means, which will give you an idea of how much discretionary income you will have after you pay your expenses. To help create your plan (or validate the one you've made on your own) enlist the aid of a fee-only financial planner, who you pay by the hour. Search for fee-only planners in your area at Or use the retirement planning tools at Again, local non-profit groups often help seniors pay bills and budget.

  • Delay Social Security as long as you can. Seniors' rising expenses yet stagnating incomes are largely responsible for the increase in their debt levels. To increase your monthly income in retirement, consider delaying starting Social Security as long as you can to get the increased monthly payment when you do start, says Conheady.

    “This delay may need to be combined with working until age 65 or 70.” By working a few additional years, not only do you not withdraw your assets, but you allow them to grow even larger. Indeed, a recent study from the Center for Retirement Research at Boston College found that when households push back retirement from age 65 to 67, they reduce the risk of being unable to maintain their current standard of living substantially. Similarly, retiring two years earlier, at age 63, increases those unfortunate odds.

  • Take advantage of your home. A growing number of elders are being forced to charge their everyday housing expenses (such as utility bills) on credit cards, according to the report.

    Instead of letting your home push you further into debt, use it as an asset. Consider a reverse mortgage, which allows you to draw from the money in your home without ever having to move or pay it back. When the home is finally sold, the bank gets the principal and interest. But do not rush into this type of mortgage.

    “I think people should push off getting a reverse mortgage for as long as they can,” says Conheady. “So not before age 70, if possible. In today's world we are living for a long time, so you want to make sure you don't outlive the cash flow you are generating.”

    And note: Reverse mortgages are not for everyone. Fees usually range from $7,000 to $11,000, so they may not make sense for those who can pull out only $50,000 from their home.
  • Plan for the unexpected. Many expenses, such as health care, generally are unknown until later in life, which make it hard for a senior on a fixed income, says Loonin. But if you fail to plan for these extra costs, you may end up charging them to your credit card.

So, if you are 65 or older and your insurer does not cover prescription drugs (or you lack insurance), make sure you are enrolled in Medicare Part D. The longer you wait, the higher the premium you will pay.

Jean Chatzky is an editor-at-large at Money magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today Show" and is also a columnist for Life magazine. She is the author of four books, including "Pay It Down! From Debt to Wealth on $10 a Day" (Portfolio, 2004). To find out more, visit her Web site, .