Tag Archives for investing

Seniors in hock over credit card debt. Cap attempt a rare tri-partisan (D), (I), (R) effort

Published in RINewsToday on March 24, 2025

Over two weeks ago, a new AARP survey revealed that 47% of respondents who carry credit card debt use their credit cards to pay for basic living expenses that they do not have enough money to cover.  Seventeen percent of these individuals relied on using their credit card to cover month to month expenses of daily living over the last year.

These findings, detailed in the 47-page report, “Credit and Debt and Adults Age 50 Plus,” put a spot light on credit card debt as now the most common type of debt held by adults age 50 plus, including many at all income levels. The survey results drive home the point that rising costs of basic expenses for food, housing and utilities, along with skyrocketing health care costs and unexpected financial burdens, are quickly chipping away at the financial well-being of older Americans in their retirement years.

AARP’s credit card survey also found that 37% of older adults with credit card debt report that they have more credit card debt than a year ago. Nearly half (48%) of older adults who carry a credit card balance from month-to-month owe $5,000 or more, and 28% carry a balance of $10,000 or more. Almost 9 in 10 respondents (87%) say that unexpected expenses contribute to their credit card debt.

“A concerning number of older adults carry credit card debt today just to make ends meet,” said Indira Venkat, AARP Senior Vice President of Research in a statement released on March 10, 2025 announcing the findings of this survey. “Credit card debt can jeopardize retirement security. For many retirees, who often live on a fixed income, it’s a real challenge to pay down debt without significant trade-offs,” she says.

The survey also found that older adults are the most likely to carry a monthly balance, including people ages 50-64, those with incomes under $40,000, as well as Black and Hispanic/Latino older adults. More than half (52%) of adults ages 50-64 have credit card debt. Significant portions of those ages 65-74 (42%) and 75 and older (35%) also carry credit card debt.

Credit card debt results in long-term financial strain of the older card holder. Among those who are worried about their credit card debt, the survey found that 43% are very worried about how long it will take to pay off their debt. Roughly 1 in 5 expect to take more than five years to pay it off. The top drivers of credit card debt include everyday expenses, including vehicle costs, housing costs, and health care.

Fifty percent of the respondents say that health care expenses have contributed to their credit card debt, noted the survey findings. Among this group, the biggest medical expenses contributing to debt are dental expenses (46%), prescription drugs (35%), and vision care (19%)

And, twenty-three percent say they are still paying off balances on cancelled credit cards. As a result, forty-six percent say credit cards have hurt their ability to save for the future.

Bipartisan efforts on Capitol Hill to cap high credit card interest rates

With credit card interest at an all-time high, carrying high-interest credit card debt month-to-month can be risky for those who struggle with paying of the balance as the interest accrues.

This financial issue brings together two strange bedfellows— Sen. Bernie Sanders (I-Vt.)  a democratic socialist advocating for progressive policies like universal healthcare and wealth redistribution, and Sen. Josh Hawley (R-Mo.), a conservative populist focused on nationalism, traditional values, and limiting government intervention—to cap high credit interest rates.

On Feb. 4, 2025, the Senators introduced their bipartisan legislation, S. 381, the 10 percent Credit Interest Rate Cap Act, that caps credit card interest rates at 10% for five years to provide financial relief to consumers facing high interest debt.  Later, Sen. Jeff Merkley (D-OR) would become a cosponsor.

S. 381 was referred to the Senate Banking, Housing, and Urban Affairs for consideration.  A companion measure, H.R. 1944 was introduced by Rep. Alexandria Ocasio-Cortez and referred to the House Committee on Financial Services.

The legislation responds to concerns about rising credit card debt, which reached a record $1.17 trillion in the third quarter of 2024. At that time, the average credit card interest rate was approximately 28.6%, significantly higher than the proposed 10% cap.

Capping high interest rates can easily help credit older adults, burdened by credit card debt.  According to Sander’s statement, “If a consumer has a $5,000 credit card balance with a 28% interest rate and can only afford to make the minimum payment of $166 a month it would take that person over 24 years to pay off and would cost nearly $11,000 in interest. If credit card interest rates were capped to 10%, that same consumer would save over $7,000 in interest.

“During the campaign, President Donald J. Trump pledged to cap credit card interest rates at ten percent,” Sanders said. “When large financial institutions charge over 25 percent interest on credit cards, they are not engaged in the business of making credit available. They are engaged in extortion and loan sharking. We cannot continue to allow big banks to make huge profits ripping off the American people. This legislation will provide working families struggling to pay their bills with desperately needed financial relief,” he says.

“Working Americans are drowning in record credit card debt while the biggest credit card issuers get richer and richer by hiking their interest rates to the moon. It’s not just wrong, it’s exploitative. And it needs to end,” said Hawley. “Capping credit card interest rates at 10%, just like President Trump campaigned on, is a simple way to provide meaningful relief to working people. Let’s do it,” he said.

While the bill aims to alleviate the financial burden on consumers, the American Bankers Association (ABA) argues that such a cap would have a devastating effect on access to credit for individuals and small business owners who use their personal credit cards as a form of liquidity by imposing an all-in annual percentage rate cap at 10 percent.  A cap on credit card interest rates is a price control on credit that will lead to credit shortages for consumers, charges ABA.

Reaching across the aisle 

On Sept. 18, 2024, at Uniondale, New York, at a campaign rally GOP presidential nominee, President Trump, then candidate Trump, promised to cap interest rates at 10% to provide temporary and immediate relief for hardworking Americans who are struggling to make ends meet and cannot afford hefty interest payments on top of the skyrocketing costs of mortgages, rent, groceries and gas.

As duly elected President, now Trump has the opportunity to work with Senators Sanders and Hawley and Rep. Ocasio-Cortez to put an end to hefty interest payments as he promised over six months ago on the campaign trail.  Trump now can put partisan politics behind, urging the Republican-controlled Senate and House to S. 381 and H.R. 1944 a fair committee hearing and floor vote.

Hopefully, the Rhode Island legislative delegation will quickly support the bipartisan proposals in both chambers, signing on as cosponsors.

Capping high credit card interest rates might just be one way to bring the two warring political parties together on behalf of American consumers.  Let’s see.

NOTE:  The findings of AARP’s Credit Card Debit Survey are based on a survey of 4,846 adults ages 50-plus who carry over credit card debt from a previous month, whether on active cards or cancelled cards.

To read AARP’s latest Credit Card Debt Report, to go www.aarp.org/content/dam/aarp/research/topics/work-finances-retirement/financial-security-retirement/credit-card-debt-survey.doi.10.26419-2fres.00929.001.pdf

To watch former president and GOP presidential nominee, Donald J. Trump, calling for capping high interest rates on Sept. 18, 2024, go to www.c-span.org/program/campaign-2024/former-president-trump-campaigns-in-uniondale-new-york/648902

Learn more about AARP’s resources for managing money. go to  https://www.aarp.org/tools/money/?cmp=RDRCT-TOOLS-MONEYTOOLS-09262024.

Retirees reflect on financial fragility of retirement

Published in RINewsToday on December 9, 2024

Literally just hot off the press… the Los Angeles, California-based nonprofit Transamerica Center for Retirement Studies® (TCRS) in collaboration with Transamerica Institute®, released the findings of its 24 Annual Transamerica Retirement survey.  Considered to be one of the largest and longest running annual surveys of its kind, its findings paint a picture of being retired in America.

Retiree life in the post-pandemic economy examines the health and well-being, personal finances, and retirement security of U.S. retirees no longer working. The report’s analysis was prepared by the research team at Transamerica Institute and TCRS. The 25-minute online survey was conducted within the U.S. by The Harris Poll on behalf of Transamerica Institute between September 14 and October 23, 2023, among a nationally representative sample of 10,002 people, including a subsample of 2,404 retirees who are retired and do not work.

Shedding light on the many facets of retirement

According to TCRS’s retirement survey, released on Nov. 26th, fewer than one in four retirees (23%) say they are very confident and able to maintain a comfortable lifestyle throughout their retirement.

“Retirement brings freedom and time for personal pursuits,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS in a statement announcing the release of the 76-page report. “However, retirees are living on a fixed income with limited financial resources. Many would be unable to withstand a major financial shock, such as the need to pay for long-term care. Retirees’ fragile financial situation serves as a cautionary tale that underscores the imperative for strengthening our retirement system,” she says.

“Many retirees may wonder what they could have done differently to save and plan for retirement, and many may feel they have done everything right but still came up short,” adds Collinson. “In reality, over their working careers, the world has changed, the retirement landscape has evolved, and the need to self-fund a greater portion of one’s retirement income has intensified,” she said.  

Based on the report’s findings, retirees are active and engaged in meaningful ways. As retirees, they are:

·         spending more time with family and friends (58%)

·         pursuing hobbies (43%)

·         traveling (36%)

·         taking care of their grandchildren (19%)

·         doing volunteer work (16%)

·         caregiving (10%)

Although most retirees express a positive feeling about life, others say they are distressed.  Most retirees say they are:

·         generally happy (89%)

·         have close relationships with family and friends (88%)

·         enjoying life (86%)

·         have a positive view of aging (79%)

·         have a strong sense of purpose (79%)

·         have an active social life (53%)

However, three in 10 retirees (30%) have financial trouble in making ends meet, 27% indicate they often feel unmotivated and overwhelmed, 24% often feel anxious and depressed, and 17% are isolated and lonely.

Retirees who retired before the age of 65 are cutting short their working years and income, a situation that could inevitably lead to a decrease in their retirement income. Almost six in 10 retirees say they retired sooner than planned (58%) and, among them, almost half did so for personal health-related reasons (46%) and employment-related issues (43%), while 20% did so for family-related reasons. Only one in five (21%) retired early because they were financially able.

Retirees are struggling to juggle competing financial priorities and debt, the findings indicate. Retirees’ say their current top financial priorities include

·         building emergency savings (31%)

·         just getting by to cover basic living expenses (29%)

·         continuing to save for retirement (24%)

·         paying off one or more forms of debt as a current financial priority (45%)

o    paying off credit cards (30%), paying off mortgages (20%), paying off other consumer debt (10%), and paying off student loans (3%).

The survey found that the retiree’s greatest retirement fears centered around money and health issues.  Forty-two percent expressed fear that Social Security will be reduced or may cease to exist in the future.  Almost six in 10 retirees (58%) expect Social Security to be their primary source of income throughout their retirement, reinforcing their view that the retirement program is the cornerstone of their retirement income.

Retiring before age 65 impacts your Social Security benefit. Retirees currently receiving Social Security started at age 63 (median) which translates to a lower monthly benefit than if they had waited until their full retirement age of 66 or 67, depending on the year they were born. Only 4% of retirees waited until age 70 or later which would have maximized their monthly benefit, noted the report.

Additionally, the retirees fear declining health that requires long-term care (37%), losing their independence (32%), outliving their savings and investments (32%), and cognitive decline, dementia, or Alzheimer’s (28%).

Fear of unanticipated costly long-term care

Only 13% of retirees are very confident they would be able to afford long-term care, if needed – and only 13% have long-term care insurance, noted the findings. When asked if their health declines and they need help with daily activities and/or nursing care, almost half of retirees (48%) say they plan to rely on family members and friends to provide such care. Moreover, relatively few retirees have codified their wishes in legal documents such as powers of attorney and advance directives.

Annual Income

The survey respondents had an annual household income of $55,000 (estimated median) as of late 2023 with more than one-third of retirees (36%) having an income of less than $50,000. Retirees’ household savings excluding home equity were $71,000 (estimated median) in 2023.

Untapped opportunities might be helpful to retirees in strengthening their finances.The researchers say that retirees need to be fully engaged in financial planning or taking steps that could improve their overall situation. Only 24% indicate they have “a lot” of working knowledge about personal finance, 19% have a financial strategy for retirement in the form of a written plan, and just 7% frequently discuss saving, investing, and retirement planning with family and close friends. Only one in three (33%) use a professional financial advisor.

“Many retirees may wonder what they could have done differently to save and plan for retirement, and many may feel they have done everything right but still came up short,” said Collinson. “In reality, over their working careers, the world has changed, the retirement landscape has evolved, and the need to self-fund a greater portion of one’s retirement income has intensified.”

Thoughts about Retirement in the Ocean State    

“I can confidently say there’s less road ahead to retirement than there is behind me,” quips Kemal Saatcioglu, Ph.D., associate professor and chair of the Economics and Finance Department at Rhode Island College (RIC). “Going through this report was an eye opener even for me and I came away with a mix of inspiration, awareness, and a sense of urgency,” he says.

“Asnoted in this report, the retirees’ ability to find purpose, freedom, and joy, even amid challenges shows the resiliency and flexibility we all possess, notes the RIC Professor.  “Knowing that many retirees successfully navigate these waters is inspiring and is a motivator for getting into retirement planning with confidence,” he adds.

According to Saatcioglu, the report is a wake-up call for retirees. The data clearly indicates that they, in general, can be better prepared.  “The statistics about limited savings, reliance on Social Security, and the lack of written financial plans might push those of us nearing retirement to re-evaluate our financial readiness. The survey data will likely create motivation to consult a financial advisor to ensure better use of available resources,” he says. 

Saatcioglu calls the points about life expectancy and the length of retirement striking. “While it may be daunting at first to consider how 15 to 20 years could stretch retirement savings, prioritizing strategies for sustainability, such as long-term care insurance or budgeting for healthcare costs are great steps to take,” he says, especially the importance of mental health and stress management also encourages a more holistic view of our overall well-being.

Retirees must recognize local challenges and strengths. “Granted Rhode Island is not the most retirement friendly state. Higher costs of living, especially on housing, utilities, and food, and less than a friendly tax environment are challenges but knowing about them ahead of time and taking steps early on can mitigate those challenges,” recommends Saatcioglu.

Finally, Saatcioglu believes that the survey creates a motivation to take action—whether it’s updating financial plans, discussing retirement goals with family, or exploring community resources. Retirement can be an exciting, and rather long, stage of life, as long as proactive steps are taken now.

Maureen Maigret, Policy Advisor for the Senior Agenda Coalition, notes that the findings of the Transamerica report align with what older Rhode Islanders are concerned with in terms of their economic security, especially the  cost of healthcare and housing, worries about being able to afford any needed long-term services and a lack of planning to meet those need.  “Adding to those worries is uncertainty about possible proposed changes from a new federal administration for two of the most valuable programs for older adults – Social Security and Medicare,” she says.

According to Maigret, the Senior Agenda Coalition of RI (SACRI) has advocated to enhance the economic security of older Rhode Islanders.  She stated that a recent SACRI survey found the costs for health care and housing were priority issues for the state’s older population.  “That’s why we will continue to work in 2025 to expand the Medicare Savings Program to increase its income eligibility so lower-income older adults and persons on Medicare will be able to get their Medicare Part B premium covered and in some cases co-payments,” she says, also stressing the importance of ensurng that the housing bond funds are targeted toward developing more affordable housing options for older adults.  

“I deeply appreciate the insights in this report. It highlights the importance of proactive retirement planning and the emotional and financial complexities retirees face in the post-pandemic economy,” says Josh Wells, CEO of The Retirement Factory, who stresses the importance of balancing the emotional and financial aspects of retirement.

According to Wells, retirees often feel the weight of navigating Social Security decisions or managing healthcare costs. This report underscores that many retirees are unsure about these critical choices, with only 7% frequently discussing retirement planning with family or friends and just 33% using a financial advisor. ”It’s a powerful reminder that education and open dialogue are key to achieving retirement confidence,” he says.

“Rhode Island retirees exemplify resilience and adaptability in the face of change,” says Wells.  “The report highlights that 70% of retirees feel confident about maintaining a comfortable lifestyle, even amidst financial and health challenges. For Ocean State retirees, this confidence is bolstered by state-specific benefits such as the ability to exclude up to $20,000 of retirement income from state taxes for those at full retirement age and meeting income thresholds, as well as property tax relief of up to $600 for eligible seniors with limited incomes,” he says, noting that these program reflect “the state’s commitment to supporting its senior population, enabling retirees to plan carefully, stay connected to their communities, and enjoy a fulfilling retirement.”

Like the report’s findings, RI retirees are juggling competing financial priorities, especially with only a minimal 2024 increase in their ERSRI pension, says Sandra Paquette, representing the Advocates for Cost of Living Adjustment (COLA) Restoration and Pension Reform. Of equal, often ignored significance, these retirees have been deprived of 13 years of potential savings,” she says.

“By unjustly removing a COLA, the former teachers, state workers and some municipal employees  have been plunged into survival mode, where limited, fixed incomes are barely sufficient to cover necessities and essentials. In many instances, choices must be made among prescriptions, heating and food– by individuals who spent a lifetime of service, and of contributing  to their retirement benefits,” adds Paquette.

For a copy of Transamerica Center for Retirement Studies’ new report, go to https://www.transamericainstitute.org/research/publications/details/retiree-life-in-the-post-pandemic-economy-2024.