Avoid High Interest Credit Card Debt During Retirement
By David Ackley
09/12/2006
Seniors are falling into the same trap that college kids have been sucked into since the invention of the credit card – lots of high interest debt they can’t afford. Between 1992 and 2001, revolving credit card debt for seniors aged 65-69 has more than doubled to about $6,000 on average. The National Consumer Law Center (NCLC) states that 1/3 of retired seniors see this debt as a hardship.
If you are a senior or care for someone who is, the first thing to do is get informed about credit and how it works. Today’s credit process has evolved from what it was when most older Americans were first introduced to the concept. Late fees, increases in interest rates and damaged credit reports are but the tip of the iceberg. To protect yourself, always read any credit application prior to signing. By law, a credit card application must include a Shumer Box – a disclosure of interest rate, credit limit and late fees.
Before getting into more debt, you also need to know what you can afford. Set up a budget and figure out your current expenses. Round up the numbers so you’re not missing anything. You should then amortize your debt using helpful tools such as this amortization calculator.
Another thing to consider is delaying your actual retirement. Postpone Social Security and stay working if it means increased income every month. Once you start collecting, your income will decrease significantly, possibly below the point where you can afford your debt.
Finally, make sure that your health is covered. Many insurance companies will not cover prescription medications for seniors 65 years old and older. As an alternative, you can enroll in Medicare Part D, but do it soon as premiums can increase over time.
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