Released August 20, 2009
STILLWATER, Okla. – There are no age limits when it comes to a financially secure future. In fact, Americans age 65 and older are now at a greater risk of taking on more debt as they increasingly use credit cards to finance the necessary costs of living.
Results from a recent study, The Plastic Safety Net: How Households are Coping in a Fragile Economy, indicate that older adults may be under their worst financial pressures since the start of the economic recession.
“The report looked at the change in credit card debt in the United States in low- and middle-income households from 2005 to 2008,” said Eileen St. Pierre, Oklahoma State University Cooperative Extension personal finance specialist. “It found a dramatic increase of 26 percent in the debt usage of Americans aged 65 and older, the greatest change in all of the age groups surveyed. The average credit card balance carried by this age group in 2008 was $10,235. Only those aged 35 to 49 carried a higher average credit card debt balance.”
St. Pierre said this increase in credit card debt usage by older adults is not surprising since the steep decline in the stock market has greatly reduced the value of their retirement portfolios. According to the report, people 65 and older reported the highest amount of credit card debt due to medical expenses, an average of $3,988. Paying for prescription drugs and dental expenses were the two most cited reasons for using credit cards to pay for out-of-pocket medical expenses.
“Retirees and those approaching retirement are placed in a difficult position during these tough economic times,” she said. “There is a real danger that taking on too much debt will reduce their future quality of life in retirement.”
Jan Johnston, OSU Cooperative Extension gerontology specialist, said with people living longer and restricted by fixed incomes with little to boost their incomes, debt provides a temporary relief from unexpected expenses.
“Making matters more difficult is with a fixed income, one illness or disability can really force older adults into debt,” Johnston said. “Retirees may not be in the position physically to go out and get another job or work more or work harder to make extra money to pay the bills.”
The study was conducted by Demos, a non-partisan public policy research and advocacy organization. The complete study is available at http://www.demos-usa.org.
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Writer: Katie Reim, 405-744-6792, katie.reim@okstate.edu
