More senior citizens are taking on excessive credit card debt, leaving them financially vulnerable. Reduced retirement savings due to the stock market, increased medical costs, and fixed incomes leave many seniors no choice but to rely on credit cards to survive. In fact, a recent study by Demos found that the average self-reported credit card debt among low- and middle-income consumers 65 and older increased 26% from 2005 to 2008, to $10,235.  Debt for all borrowers surveyed only increased 3% during that time. Unfortunately, financial problems of seniors are so serious that the number of older Americans filing for bankruptcy has increased at alarming rates, making them the fastest growing age group in the bankruptcy courts.

While debt problems plague people of all ages, they are particularly difficult for senior citizens to handle. For example, many older Americans must forgo medical treatment and exhaust savings accounts in effort to repay debt. Following are some suggestions to consider if you or someone you know is experiencing financial trouble.

Prioritize your debts. Some debts are more important pay promptly than others. For example, you must continue to make mortgage or rent payments so that you do not lose your home. You must also pay utilities and provide food. Please do not be tempted to let your insurance coverage expire.

Know your rights. Do not feel “bullied” by collectors into making payments you cannot afford or paying debts that may not be yours. Visit FTC.gov and read the Fair Debt Collection Practices Act (FDCPA) to learn your rights when dealing with collectors.

Make a plan. Determine how you are going to repay your debts and present that plan to your creditors. Many creditors, particularly doctors and hospitals, may be willing to reduce your required monthly payments. If you are able to negotiate a revised payment schedule, get all of the details in writing to avoid future problems.

Be realistic. You may be used to caring for others rather than having others care for you. A 2007 study by HSBC Group, the Oxford Institute of Aging, and Harris Interactive, found that older people are much more likely to give care to younger generations than to receive it themselves. However, a 2009 survey of adult children revealed that the majority (67%) were more willing to give financial help than their parents think they would be.

Tap avaiable resources. You may have more resources than you realize. According to the AARP, a reverse mortgage can turn the value of your home into cash without having to move or to repay the loan each month. In addition, you have a whole-life insurance policy, you may be able to cash-out. You might also consider taking on a part-time job or selling unneeded assets.

Finally, don’t be afraid to ask for help. Research any and all assistance offered by local city and county government offices; you may also get help from your local United Way. 

Children of aging parents should read the blog post on Consumerism Commentary titled Helping your parents with their finances.

Hoepfully, you enjoyed hearing finanical advice from young to old and from old to young. I couldn’t help but notice the similarities in their advice—it was a good reminder that the basic rules still apply. However, we all know that when it comes to budgets, one size does not fit all.  After all, your life is probably very different than it was five or ten years ago and changed circumstances call for a changed financial plan. Following are some smart money moves for any life stage.

20s and younger
Members of Generation Y are entering the workforce and comprise the largest consumer group in American history.  Unfortunately, there is evidence that Generation Yers can expect to struggle with student loan and credit card debt.   If you are in your 20s, set yourself up for financial success by using credit responsibly.  A 2008 report from Mintel reveals that 69% of Generation Y workers who can participate in a tax-deferred 401k retirement savings plan are not. If you are in your 20s, buck that trend because now is also the perfect time to take advantage of compound interest by establishing a retirement savings plan.

30s
Generation X is sometimes referred to as Generation Debt and for good reason—9 out of 10 consumers in their 30s are in debt, according to the Federal Reserve’s 2007 Survey of Consumer Finances.  Coupled with student loan debt and increased housing costs, many 30-somethings have a tough row to hoe.  If you are in your 30s, make sure not to acquire more mortgage debt than you can afford and make a concentrated effort to repay education loans.   Also, in addition to retirement savings, be sure to establish an emergency savings cushion so that you do not have to rely on credit.

40s
Regardless of whether you are a member of Generation X, the Boomerang Generation or consider yourself a Baby Boomer, many 40-somethings are facing unique financial challenges.  Fortunately, workers in their 40s are likely entering their peak earning years making this the ideal time to secure their financial footing.  If you are in your 40s, paying down debt is imperative.  Do not be tempted to take on a lengthy mortgage loan that will haunt you in the future.  Now is also a good time to review your retirement goals to make sure you are on-track.

50s and beyond
Three out of four American Baby Boomers surveyed for The Hartford’s 2008 international retirement survey say in that they were “not too” or “not at all” confident that their sources of income for retirement will be sufficient. If you are behind on your retirement goals, it is time to play catch-up.  In The “catch-up” contribution limit was raised to $5,500 for 2009.  Also take the time to prepare or update your will and other important legal documents.  As always, maintaining adequate health insurance is a must.

Finally, consumers of all life stages should seek needed advice from a professional credit counselor or financial planner.  After all, a lifetime of financial security is priceless.

According to a recent study by AARP, many Americans are risking their financial futures in order to fulfill with an immediate need.  In fact, 23% of consumers surveyed by AARP said that they have prematurely tapped their retirement funds.  A survey by Transamerica Center for Retirement Studies found that 18% percent of workers had a loan outstanding from their retirement plan in 2007, up from 11% in 2006.

If you plan to borrow from your 401(k) retirement plan, be careful.  Plan loans usually charge the prime interest rate plus one or two percentage points.  Because the interest you pay goes right back into your 401(k) account, you might think of this as a “free” loan.  Not so.  In fact, it could cost you more than the stated rate.  Say you borrow from your plan at 10% but the cash you pull out has been earning 12% in the stock market.  You are losing out on the additional earnings.  And you lose future compounding on these lost earnings.  In time, that could amount to quite a nest egg.

Another potential problem is that if you quit or lose your job, your loan may be due immediately.  This could be at a time you may least be able to afford to pay back the loan.  If you can’t pay back the loan, the loan is considered a distribution.  That means you will owe taxes on this distribution and, if you are under age 55, you will get hit with a 10% early withdrawal penalty too.

For more about the cons of borrowing from your retirement, read this post by Linda Rowley.