Loving kids to debt: Older Americans in trouble for 'helping' children

Published: Saturday, April 20 2013 8:35 a.m. MDT

Connie and Kay Wells in their home in West Valley City with photographs of their children and grandchildren behind them.

Michael De Groote, Deseret News

The first thing Carmen Wong Ulrich discovered when she wrote an article for the New York Times on older Americans getting into debt was how reluctant seniors were to talk about their finances.

"It was incredibly hard to get seniors to talk about," says Ulrich, the author of "The Real Cost of Living," and a frequent guest on national television shows. "It wasn't about medical debt, it was about debt you wanted to take on for other people or you just wanted to buy stuff. Boomers don't want to talk about that stuff."

Part of the reason they may not want to talk about debt is that the news isn't very encouraging. A January 2013 analysis by Nadia Karamcheva at the Urban Institute, a non-partisan think tank based in Washington, D.C., that examines social and economic issues, found debt for older Americans is increasing.

In 1998, about 30 percent of American adults ages 65 and older were in debt, with the median value of that debt per person at $13,586. In 2010, the percentage of older Americans in debt was at 43.4 percent, with a median value per person of $21,165. This is using inflation-adjusted values.

The biggest portion of this debt is mortgages. The portion of older adults with an outstanding mortgage jumped from 16.2 percent in 1998 to 23.1 percent in 2010. The median value of that mortgage debt doubled over that time period to $51,000 in 2010.

This means older homeowners, on average, owned 93 percent of their homes in 1998. By 2010, older homeowners owned, on average, 87 percent of their homes.

Working toward retirement

Karamcheva says there is a common pattern of life where the young borrow or invest in education, for example, with a high expectation of earning a salary in the future. They then accumulate more assets toward the middle part of their life and finally, when older, enjoy the fruits of their labors — de-accumulating their wealth.

With this standard lifestyle model, it seems strange, Karamcheva says, that debt among the elderly is increasing. During retirement, you would expect individuals to be living off their accumulated assets and Social Security.

Best-selling financial author, columnist and radio host Dave Ramsey says in an email interview with the Deseret News that this concerns him. "Your largest wealth building tool is your income, and when it's tied up in monthly payments, it's hard to feel like you're in control of your money," he says. "Walking around with no budget, no savings and borrowing money doesn't work. Make a plan for your money so can get out of debt and live your retirement years with dignity."

Kay (63) and Connie (60) Wells from West Valley City are trying to act wisely. They were married in 2000, a second marriage for both. Both had kids — Kay has five daughters and Connie has five daughters and one son.

"Before I got married to Connie, I was treading water financially," Kay says. "I was just living paycheck to paycheck."

Connie was also struggling financially.

When they first got married, five children and one grandchild were living with them. After a few years, they encouraged one of the older children to get a job and get out on her own. The child moved out to another parent — who told her the same thing.

Connie and Kay say just giving money to children wouldn't always be helpful — and sometimes would just enable children to not take responsibility. "If you help them out too much, you are not really helping them out; you are hurting them," Connie says. "And if something happened to you, they wouldn't know how to survive."