Dangers of the Growing Burden of Debt by Seniors and Baby Boomers 

 

The stigma of debt is not as great for older individuals as it once was. As a result, the amount of debt held by seniors and baby boomers is growing every year.

The bulk of this debt is in the form of home equity mortgages and credit cards.  Some of this debt is due to escalating medical costs. Other reasons include the extremely dismal fixed interest returns on savings and investments.

The Growing Problem

The median level of debt among households led by seniors 65 and older more than doubled between 2001 and 2013 to $40,900, according to the US Census Bureau.

Only 24% of homeowners over the age of 62 had mortgage debt in 1992. But that figure soared to 45% in 2010.

These figures show American seniors have grown much more likely to be in debt — even as younger groups have become less likely to have debt. People 65 and older were more likely, for example, to have a mortgage in 2011 compared to 2000.

Older households are less likely to own their homes free and clear than was once the case. Over the past decade, older Americans also ramped up their use of home-equity loans and have borrowed against the equity in their homes. Others refinanced and took out cash, or extended the term of their mortgages.

Why Is Borrowing Growing?

Money was easily available before the credit crisis in 2008-- and it was cheap. Some senior citizens and baby boomers used the funds to make home repairs, pay for vacations, help their children, or pay for children’s college education. Others put the proceeds in the stock market, figuring they could make a lot more money.

Most people borrowed more because of availability. Surprisingly, many got the investment-buying bug more than everyone else did.

The New Concerns

Growing debt has contributed to seniors and baby boomers inability to pay for food, rent, insurance and medical care in later life. Money used towards these basic living costs must now be used instead to pay down the debt load.

Debt has become a major impediment to pre-retirees and aging seniors and their ability to cope with, or even enjoy the final years of their life.

The new tax law changes has aggravated the tax and financial situation of seniors and Baby Boomers.  Changes to interest deductibility has created confusion and fear. It has also affected other aspects of seniors and baby boomer tax and financial affairs, and their planning for adequate income in retirement.

Seniors and soon to retire baby boomers need to re-evaluate the handling of their debt for both the tax and financial impact on their ability to achieve a successful future with adequate income.

For more information to understand how the new tax law affects you, or to deal with the growing problem of debt, contact Harvey Weinstein of Tax Advisors Network, at 860-778-8168.