Retiree debt continues to grow

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As I said in a recent interview with the Sunday Telepgraph, the SEQUAL statistics show that the proportion of retirees using reverse mortgages for debt consolidation has increased by 25 per cent in just two years. This seems to indicate that seniors are either retiring with more debt than ever before, or worst still, they’re accumulating high levels of new debt in retirement. I think both factors are at play, but I’m more worried about the latter because pensioners are racking up debilitating credit card debt like never before.  

At Seniors First we see many retirees who’ve struggled for years to pay the bills on the pension, only to turn to credit cards when they finally run out of spare cash. It is not uncommon for them to approach us for help only once they’ve already accumulated $30-40,000 of credit card debt. With rates of 18 or 19 per cent (at least), credit cards are probably the worst option for paying bills and covering the cash shortfall the aged pension leaves for many.    

If you’re an Australian senior watching with alarm as your credit card balance continues to grow each month, and you have no way to pay it off, you should seek help as soon as possible. The earlier you attack this problem, the better. Not only could you save thousands of dollars in exorbitant interest payments, your quality of life will suffer until you’re able to eliminate this source of worry. A frank discussion with children and/or family is often a good place to start.

Whilst using a reverse mortgage or equity release product to pay off credit cards and residual home loans can be a good strategy if there are no other alternatives left (such as using super or selling the home), it raises more fundamental questions about the inadequacy of the aged pension, soaring personal debt levels in general, and the paucity of consumer education on financial management.