Children, spouses, even distant relatives in faraway towns often expect to inherit some money when death finally claims a family member. But many are getting a big surprise after the will is read: The money is owed to creditors.
A survey of 200 Americans found that almost 40 percent of retirees are not concerned about paying off their debts during their lifetimes.
See also: Contesting a will, inheritance.
The survey by CESI Debt Solutions, a nonprofit credit counseling organization, found that 56 percent of the retirees had debts when they left the workforce, but almost none said they had delayed retirement to pay them off. In addition, 59 percent had saved less than $50,000 toward retirement.
"We have become much more comfortable with indebtedness than were our parents and grandparents," says Neil Ellington, executive vice president of CESI, which gives free credit counseling to more than 2,000 Americans per month.
Ellington cites a recent case of a 65-year-old woman who was enjoying herself after retirement: "The combination of buying things for herself, her children and her friends, along with travel and normal living expenses, added up. When her debt reached $17,000, she knew she had to do something, so she came to us for help."
Education courses taught her how to take charge of her finances and live within a budget for the first time, Ellington says.
Health care on credit
While some retirees take on debt to fund things such as a Pacific cruise they've long wanted to take, a growing number do so because they have no choice.
People are living longer, and increases in health care costs are hitting at a time when many employers are cutting back on retiree medical and pension benefits. Many older people living on fixed incomes have no way to handle unexpected expenses except by running up debts.