According to a new poll conducted by National Foundation for Credit Counseling, 37% of respondents nationwide indicate the element of their life they would least like divulged is their credit score. Next on the list of embarrassing secrets? Credit card debt.
That these two go together really shouldn’t come as any surprise, as they are often closely linked.
How Credit Scores Work
Credit card debt is one of the most highly-weighted factors in credit scores, and it works like this: think of a jar. That jar represents the limit on your credit card. When the jar is full, you have hit the max on your card. You have filled your jar with debt – and that’s not good. In fact, if your jar is more than 30% full of debt, you will start to see it significantly impact your credit score. And no one needs to tell you it’s hard to dig out from under credit card debt.
Good Advice Gone Bad
Many seniors have credit card debt. There’s no question about that. And many seniors are having a hard time managing that debt – there’s no question about that, either.
But here’s the place I think a lot of financial advice gets wacky – almost mean. When you ask seniors how they accrued so much debt, the answers rarely include lavish expenditures, exotic travel, or irresponsible habits. Rather, most tell stories of illness, unexpected home or auto repairs, or assistance to distressed family members. Often I work with leading-edge boomers taking care of advanced-elderly parents, causing a double draw-down on retirement savings. To preach a gospel of austerity to a widow struggling to pay off her husband’s final illness goes beyond uninformed thoughtlessness; this is rank insensitivity bordering on cruelty.
What are the Options?
In retirement, options often become limited by health, skill set, and available employment. Selling the home and moving in with family is indeed an option, and for some it is a good option. Selling the home and renting is not currently a good option for many, as rents are at historic highs. “Forward,” or traditional, lines of credit can, in certain cases, make sense. However, with a forward line of credit, the homeowner acquires yet another monthly payment, which renders the loan of dubious assistance.
For many, the way forward is going to include a many-faceted solution set, including a reverse mortgage. With a reverse mortgage, one of the potential options includes a line of credit that can be drawn against in emergencies, and which does not require a monthly repayment. The debt is repaid when the last person on title to the home permanently leaves the home.
No one is going to get by on just their Social Security. No one is going to make it on their 401-K. Few are going to survive on their pension, their annuity, their IRA, their bank account – or their reverse mortgage. But when added together, all these combine to create a long-term means of maintaining dignity and independence in retirement.
If you would like to explore how an FHA reverse mortgage might help with your retirement plans, give me a call. I always love hearing from you.
Laurie MacNaughton is a freelance writer and a Reverse Mortgage Consultant at Middleburg Mortgage. She can be reached at: 703-477-1183 Direct or Laurie@MiddleburgReverse.com
Laurie MacNaughton [NMLS# 506562] ∙ Reverse Mortgage Consultant, President’s Club ∙ Middleburg Mortgage ∙ 8190 Stonewall Shops Square ∙ Gainesville, VA 20155 ∙ 703-477-1183 Direct ∙ Laurie@MiddleburgReverse.com∙ www.MiddleburgReverseLady.com