Raleigh, NC – November 11, 2010- Look out children, spouses, distant relatives and even creditors. The money you might be expecting to receive from an estate may not be there after all….it could be wiped out paying off the debts of the deceased.
A recent survey of more than 200 Americans, commissioned by the national nonprofit organization, CESI Debt Solutions, found that almost 40% of retirees are not worried about paying off their debts during their lifetimes. That includes debts brought with them into retirement and accumulated since leaving the workforce. The survey found while 56% of retirees had outstanding debts when they left the workforce, 96% refused to delay retirement because of the outstanding debt. In addition, 59% had saved less than $50,000 toward retirement. Once retired, the survey found while retirees charged trips and entertainment on their credit cards, 53% used credit cards to buy medicine and pay for visits to the doctor and hospital and other medical expenses.
While the recession hurt retirement savings, it’s also affecting future retirement plans. The survey found 51% of those planning to retire soon are considering delaying retirement until the economy improves while only 57% believe they will be debt free before retirement.
The survey reveals what debts retirees owed when they quit working:
- 35% credit cards
- 30% mortgage
- 19% auto loans
- 4% student loans
- 11% other
When asked what they went into debt to buy once retired, more than 75% responded it was for medical or funeral expenses.
- 33% medication/prescriptions
- 20% doctor/hospital bills and other medical expenses
- 26% funeral arrangements
- 31% leisure activities/entertainment
- 39% vacation, travel
- 28% food, groceries
- 33% clothing/accessories/jewelry
Victoria Johnson* is 65, retired, and enjoying all the things she imagined doing when she retired. But the combination of buying things for herself, her children and her friends, along with travel and normal living expenses added up. When the debt reached $17,000 she knew she had to do something.
“I never meant to run up that big a bill,” said Johnson. “Retirement was fun, I kept saying I would get a part time job to pay it off, but I just never did, and soon it got out of hand. I was embarrassed, ashamed and I felt I was ruining the fun retirement we had planned.”
Johnson contacted CESI Debt Solutions, a national nonprofit organization that sent her what she called an “AA program for people with credit card debt.” CESI helped her pay off her debt and sent her through education courses to learn to live without credit cards. Just three months later, she felt her life and her retirement was back in order. The budget she created to pay back her debts allowed her to the light at the end of the tunnel.
“We felt so much better afterwards because not only had we taken charge of our finances, we had taken charge of our retirement,” admits Johnson. “We could still enjoy ourselves but we knew how to do it without driving ourselves into debt. My husband and I are actually much closer now because we’re honest about our goals.”
A New Level of Counseling
CESI’s debt counselors say Johnson’s situation and the survey results aren’t surprising.
“Most people are too scared to talk about their financial problems especially in their ‘golden years,’” said Neil Ellington, Executive Vice President of CESI. “Retirement is supposed to be all about enjoying the time you’ve been saving up for and the reality is many people couldn’t save enough. They’re embarrassed, but they feel it is safe to talk to us. We’ll spend hours counseling clients about how to pay off their debts as well as develop better money management practices. We always encourage honesty and open communication. The golden years can’t be golden if you’re sinking in a sea of red ink.”
For more information about CESI Debt Solutions, please visit: http://www.cesidebtsolutions.org
*name changed at client’s request