Money | Topics

Spending those golden years in the red?

By : Jean-Benoît Nadeau

More and more seniors are struggling with debt, a problem that has serious consequences on their health and life expectancy. Senior care caseworkers need to be trained to identify and help deal with this problem.

It used to be that people approaching retirement worried about having enough money to live on comfortably during their Golden Years. Their main fear was outliving their savings, not living beyond their means. But things have changed. Many seniors now have to grapple with a new problem: credit. Credit is now so easy to obtain that increasing numbers of seniors are ending up in debt before they even retire. And debt doesn’t just eat into seniors’ finances: it affects their physical and psychological health as well.

The level of indebtedness among people 65 years and older actually doubled between 1999 and 2015, with the average debt now standing at $55,000. Almost 70% of that debt is related to consumption. In the last 10 years, the number of bankruptcies in this group has increased 131%. A survey by The Sun Life Financial Barometer revealed that a quarter of Canadians were struggling to pay their debts during their retirement, and that two thirds of this amount was credit card debt.

The rising cost of living means people don’t have any choice. They use credit to make ends meet. But it quickly becomes a trap.”

Élisabeth Gibeau, policy and regulation analyst in financial and health issues at Quebec’s Union des consommateurs, co-author of the study Émergence de l’endettement chez les personnes aînées: bien comprendre pour mieux agir

The research project, which was undertaken jointly by the University of Sherbrooke and the Union des consommateurs, had a double objective: to explain how seniors were getting into debt and to create tools that caseworkers in senior care could use to help seniors deal with debt.

Debt is often a hidden problem. In discussion groups, many people told us, ‘You’re the first person I’ve talked to about my problems. My children don’t even know I’m this deep in debt.’ ”

Yves Couturier, professor at the University of Sherbrooke, Canada Research Chair in Professional Practices in Integrating Gerontology Services and co-author of the study

Older and deeper in debt

The conclusions of this “research-action” study, conducted with focus groups of 42 seniors and 29 senior care caseworkers, surprised the researchers. “We started out assuming that the seniors got into debt after they retired. In fact, most indebted seniors were already in debt before they retired,” says Élisabeth Gibeau. According to Yves Couturier, there are many factors to explain this, ranging from illness, late divorce, and underestimating their life expectancy, to easy access to credit and intergenerational assistance (i.e. giving money to their children, grandchildren, nephews, nieces, etc.).

The goal of the study was to create tools that senior care caseworkers could use to help retirees with financial problems. With that in mind, the researchers defined six “trajectories” that lead to debt. While every case may be unique, they discovered there were enough similarities to make it possible to divide these debt trajectories into categories. One is those who have struggled with debt their whole lives, whether continuously or periodically. Another is those who become heavily indebted just before retirement. Yet another is those who had never been in debt during their working lives but somehow ended up in a spiral of indebtedness in retirement. “In all these cases, there are specific factors that weigh heavily, including illness, divorce, the death of a spouse or home renovations that spin out of control and aggravate a situation,” Yves Couturier says.

Starting from these observations, and working with a committee drawn from six community organizations specialized in home economics, the researchers formulated two tools that senior care caseworkers could use to assess the financial situation of retirees and intervene when needed. The assessment tool is a quick quiz individuals can take on their own. Participants simply answer “Yes” or “No” to nine statements such as, “I don’t understand my financial situation,” or “I give money to members of my family even though I can’t afford it.”

The goal of the test is to make seniors aware they have a problem so that they can then get help from a community organization. According to Élisabeth Gibeau, the test has become very popular among seniors’ groups and community organizations specialized in family and consumer science. “People take extra copies and hand them out to their friends and family members,” she says. “They do the test themselves and then call an organization for help or to find out where to get it.”

Better tools for community groups

The other tool is an intervention guide for social workers and psychologists working with seniors in community health centres, hospitals or other community organizations.

“Senior care caseworkers often have training in social work or psychology but rarely in personal finances,” Couturier notes. “Our study shows there are key indicators that lead to debt problems among seniors: a late divorce, the death of a spouse or an illness that eats into their finances. When this happens, an alarm signal should go off in the mind of the caseworker, who should then try to find out what effect the event might have on a person’s financial situation.”

For example, if a senior care professional observes that someone frequently gives money to a family member, the intervention guide suggests following up with questions like, “Can you afford that?” “Does the person you give money to visit you on the first of the month?” or “Have you given that person power of attorney to access your bank account?” From the answers to these questions, the senior care caseworker can advise a person to either get help from a community organization, or call a help line such as Quebec’s Elder Mistreatment Helpline (in cases of theft by a family member), or Ontario’s Senior Safety Line, Quebec’s FADOQ network, Elder Abuse Ontario, the Public Trustees’ Office, or similar organizations and authorities in other provinces.

Community centres (like ACEF in Quebec) really liked the tools we were offering. One centre even organized an entire conference on the topic for seniors. At the University of Sherbrooke, the students working on the study ended up designing a mini-program on financial measures for senior care caseworkers.”

Élisabeth Gibeau

Yves Couturier doesn’t believe every senior struggling with debt will be able to resolve their problems, but the trajectories demonstrate that many do. The ones that do not, however, may be obliged to declare bankruptcy to get out of debt. “There are different strategies for each situation,” he says. “Some seniors get a part-time job. Others make adjustments to their lifestyle. Budgeting consultants can also play a big role, especially when it comes to calming people’s fears about declaring bankruptcy. They don’t call bankruptcy “debt relief” for nothing.”

Élisabeth Gibeau thinks the government should also play a larger role in helping seniors avoid debt in the first place. “If we really want to solve the problem, we need to increase retirement income and create a drug insurance program.”

The study

The study Émergence de l’endettement chez les personnes aînées: bien comprendre pour mieux agir (rising indebtedness among seniors: understanding it and acting effectively— available in French only) is an action research study published in 2017. Researchers from the University of Sherbrooke and the Union des consommateurs studied the phenomenon of indebtedness among seniors and created tools for senior care caseworkers to help them identify the problems – which are often hidden – as early as possible.

The discussion groups and scientific literature review showed that the majority of seniors struggling with debt in their retirement years are people who were already in debt before they entered old age. The study identified six trajectories of how seniors end up in debt.

Bases on the trajectories, the researchers worked with a committee of senior care caseworkers to create a series of tools, such as a leaflet containing a quiz that seniors can take on their own in order to better understand their financial situation, then get help if necessary. A more elaborate intervention tool is designed to help senior care caseworkers understand more exactly what problems seniors face and solutions to propose to help them.