Mortgages and Aging... An Epic struggle: Part 1, Credit Issues for Seniors

Credit Scores are fickle things.  The real way to think of them is that they are a quantitative measure of how you are able to manage your debts. 

With that in mind, many seniors are having big issues with credit scores because many of them HAVE NO DEBT. 

How is this possible??

For years and years, people scrimped and saved for retirement so that they would have the money they need to live a certain lifestyle for a certain amount of time.  This includes basically having pensions, annuities, retirement plans, Social Security and other passive incomes that are supposed to cover all the costs they could incur.  This is the typical FIXED INCOME mentality.

Seniors on Fixed Incomes are the Seinfeld-esque prototype of "Del Boca Vista", where Jerry's Parents lived.  Jerry Seinfeld came to visit his parents and they were guffawed at the local restaurant for showing up right after the Early Bird Prime Rib Special ended.  They were further made fun of for Jerry's gift of a new Cadillac for his father.

These little splurges are often not possible for Fixed Incomes... and this frugality hurts them in their credit score as well.

Because these seniors are living Pension Check to Pension Check, they seldom utilize the credit building tools at their disposal... namely CREDIT CARDS.  I met a friend's father who drives no more than 2,500 miles a year so he never spends money on GAS but every six weeks!!!

How do they arrive at this lifestyle??

Urban myths?? 1950s Personal Finance Books??

It is actually partially the conservative nature of those born to Depression-Era parents and then their descendents being hit with a ton of responsibility for taking care of the new Floridians from afar. 

Children of these seniors are often strapped themselves with big debts, college tuitions, credit card bills etc that are keeping them from being able to help out.  So they seek out the advice of financial planners to - simply keep their parents' monies safe rather than putting them in the position to make a little more and live a little better.

Yes... their children are keeping them in this position by helping them invest in CDs paying 2% and Municipal Bonds that pay little or nothing...

All this ultra-conservative financial planning has kept them paying with checks at the local grocery stores and really buying little else except for medications.

How can they be helped??

First of all, loosen the belt psychologically.  Wherever you can pay with a check, you can use a credit card and then only write one or two checks a month.  This also helps itemize and consolidate receipts for medication and doctors expenses which can then be used at tax time.

The kids can get online access to Mom and Dad's card accounts (with permission) to make sure that bills are getting paid and that there is no unusual spending.

That is a great place to start.

What else can be done??

Start Adding Mom's to EVERYTHING they own together.  Everything like?

• All Utility Bills
• All Deeds
• All Bank Accounts
• All Investment Accounts
• All Life Insurance Policies
• All Pension Plans
• All Safety Deposit Boxes
• and ALL CREDIT CARD ACCOUNTS

Dear old Dad may have thought it was his way of protecting the women-folk by keeping them from worrying about the money matters... but Dear Old Dad wasn't planning for life after he can't take care of himself or after he's gone and Dear Old Mom needs a new car!

And whoever is the "responsible" child in the brood, yeah you know who you are!! You and your sibs need to agree that your name needs to go on Mom and Dad's accounts as a signatory... this way if anything happens someone else has the power to make financial decisions. 

This is Dad's Fault??

Well... more likely it is the fault of Society.  It was just the norm that men worked and dealt with the finances and women worked at home and dealt with the kids.  Right or wrong? No judgement - just sociological trends at play...

Who should we contact for help??

To start... a GOOD estate attorney.  Things need to be very, VERY clear and no one needs to be fighting.  While they're still alive, it is still their money and their life.  A good estate plan will help them live better and avoid issues later. 

Then a GOOD financial planner.  NO!! PUT THEIR BOOKS DOWN... You don't want Uncle Sid, their Accountant of 50 years involved... get them someone that is impartial and someone a little more aggressive.  They need some risk so their returns are better than inflation at least.  They also need more liquidity and CDs and Munis just aren't the way to get that.

After all this, I'm sure a good family counselor will help you and your sibs deal with the in-fighting that has resulted in all this great family together time!

What Else??

That's for Part 2 - for HELOC's sakes!

1. Introduction
2. For HELOC's Sakes
3. Flow Flow Flow the Cash
4. The Cash in the Mattress vs The Cash in the Walls
5. If you've got it... Plan it!
6. As a last resort...