More Baby Boomers Are Becoming Debt-Ridden

Generation Y may have the reputation for spending right into a
bind, but their grandparents and soon-to-be-retired parents are
catching up.

More and more, seniors are entering retirement with existing
debt or taking on new debt after leaving the work force, experts say.

Today's seniors, and the first wave of baby boomers entering
early retirement, are used to carrying debt. They've spent years paying
installments on revolving bills like credit cards and mortgages.

They're so used to living well, they seem to keep spending at
high levels, even after steady salaries are replaced by retirement
income typically 30 percent lower than they brought in as workers.

And an increasing number of retirees, who face rising costs
for health care and other services, also are paying bills for their
adult children and, in some cases, grandchildren.

Added up, it's a worrying combination, financial experts and
bankruptcy attorneys say. They're seeing an increasing number of
retirees seeking help with heavy-duty debt.

"The problem that the senior citizens have is if they get into
a financial pinch, they don't have the ability to go back in the work
force, necessarily, and take care of the problem," said Neil C. Gordon,
a bankruptcy attorney with the Atlanta firm Arnall Golden Gregory.

Gordon, who sits on the board of the National Association of
Bankruptcy Trustees, said seniors make up no more than 2 percent of the
roughly 1,200 cases he handles a year -- but their numbers are growing.

The trend is playing itself out nationwide, attorneys say.

"They're older, they're sicker and they're further behind,"
said Morton A. Faller, who heads the bankruptcy and creditors' rights
group at Shulman, Rogers, Gandal, Pordy & Ecker, a Rockville,
Md., law firm.

His firm has seen a 20 percent increase in the last few years
of older people coming in to seek help with their debts.

"They're more likely to be on fixed incomes, and their
expenses are not staying within the annual growth of their incomes,"
Faller said. "They're going into a hole."

Most financial experts suggest retirees will need 70 percent
to 80 percent of their pre-retirement income to have roughly the same
standard of living. That assumes retirees will spend less than they did
as workers on things such as clothing and commuting.

But 39 percent of baby boomers in their 50s and 24 percent of
Americans in their 60s say they have not calculated how much income
they will need in retirement, according to a survey of nearly 4,000
U.S. workers, consumers and human resources executives released this
month by insurance company MetLife.

Changing situation Retiree Wayne Carman of Lawrenceville says
he's among those who didn't fully crunch the numbers.

"I figured we could make it," said Carman, 68. "But we didn't
do any real long-term cash-flow analysis."

When he retired early from his job as an executive with
railroad giant Norfolk Southern in 1993, Carman looked forward to years
of backyard gardening and traveling to far-flung locales with his wife,
Judith, who had retired in 1986 from her job at the Federal Trade
Commission.

The stock market was just beginning its record bull run, and
the funds in his individual retirement account and her brokerage
account were on a climb.

The couple moved to Lawrenceville from Virginia in 1999 so
Judith Carman could be closer to her son and two grandchildren. Two
years later she began battling a series of health problems that stymied
their travel plans.

Yet they're still paying down the $20,000 they charged on two
credit cards for a lifetime membership to a time-share travel club that
would have provided them with accommodations around the world.

They still have 27 years left on their mortgage after
refinancing it three years ago, and they are in the last year of paying
off their 2001 Buick.

Judith Carman, 79, who needs an oxygen tank to breathe, has
been in and out of the hospital for several years, adding to expenses.

Although the Carmans have health insurance, her medical bills
accounted for nearly 25 percent of their total expenses in 2004.

The Carmans plan to build a $100,000 addition to their house
and install a swimming pool so she can exercise. They plan to pay half
of that from their retirement savings and finance the rest with a
home-equity loan.

The couple spends all but $6,000 of the $75,000 a year they
bring in from investments, pensions and retirement accounts.

But Wayne Carmen says they're not fretting over money.

"It's not something we talk about," he said. "I think I would
need a greater crisis to pay off the debt, but I don't worry about the
actual debt amount."

Still, even a little crisis can mean financial upheaval for
retirees, said Suzanne E. Boas, president of Consumer Credit Counseling
Service in Atlanta.

The usual triggers: death of a spouse, unforeseen emergencies,
medical problems, and the rising costs of medicine, housing and
utilities. Some seniors are financially supporting their adult children
or taking care of their grandchildren, Boas said.

Plus, people are living longer, but they're not squirreling
away enough money for the future.

The average American who today is 60 can expect to live to
about 82, and the average 70-year-old can expect to live to 85,
according to the Atlanta-based U.S. Centers for Disease Control and
Prevention.

Increasing debt

Increasingly, people are paying for retirement-age expenses by
borrowing.

Sixty-one percent of Americans over 50 carried some debt in
2001, compared with 57 percent in 1989, according to the Federal
Reserve Board's 2001 Survey of Consumer Finances, the most recent
figures available.

The figures are more sobering for seniors 75 and older. In
2001, 29 percent carried debt, compared with 21 percent in 1989.

"Over the last decade, we've seen a gradual aging of debt,"
said Boas, whose agency conducted 65,000 budget and credit counseling
sessions last year and is seeing more seniors.

Bankruptcy lawyer Gordon said the flip side of the debt is
that seniors generally have more assets.

Like the Carmans, more seniors are heading into retirement
still paying down mortgages or taking out home-equity loans. Roughly 30
percent of seniors now owe on their homes, compared with 20 percent in
1980, according to the Demos organization, a New York-based public
policy group.

The rising debt comes amid increasing calls in Washington to
change Social Security -- government-supported income for seniors and
the disabled. It also coincides with companies' move away from
guaranteed retirement pensions in favor of less expensive but more
volatile options like 401(k)s.

"Today's seniors have a lot of economic pressures on them as
they head into retirement, including paying their mortgage," said
Tamara Draut, director of Demos' economic opportunity program. "People
who are in retirement are living in the red, and as the baby boomers
start to retire, it seems like they're not on track in terms of
retirement savings."

Brenda Mott, a 57-year-old retiree in southeast Georgia, puts
herself in that category. She retired in 1996 from her job as a
secretary because of health problems. Her husband, a 59-year-old career
Army man, retired the same year.

While they have his military health benefits and pension, the
Motts, who live in Ellaville, don't have much in the way of savings.

"We've been wanting to save for a long time," she said. "But
financially we just couldn't. It seemed like the living expenses took
everything."

In February, they had some cash left over, and her husband,
who mows lawns during the summer for extra money, opened a savings
account for them.

"We should've put a lot of thought to a lot of things earlier
in life, which we did not," Mott said, adding she'd like to rejoin the
work force, but her health problems won't permit it. "I've kind of put
my trust in the Lord."

Faller, the Maryland bankruptcy lawyer, says he sees many
seniors with what he calls "the
cross-your-fingers-and-hope-that-a-rainy-day-never-occurs syndrome."

The Carmans say if they could do it all again, they might
change a few things, like not charge that $20,000 lifetime membership
to a time-share they've used only once.

"I decided to do it because I thought we would be inclined to
travel with that as an incentive," Wayne Carman said, adding that they
can't cancel it and have to pay $600 a year in maintenance fees.

"In retrospect, I think it's probably not money well-spent."

He said he's considering going back to work part time but
can't do that right now because he needs to be home to look after his
wife.

Source: The Atlanta Journal and
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