From the Virginia Society of Certified Public Accountants - Presented by Dean Knepper, CPA, CFP®


(May 1, 2007) -- Rising healthcare costs, insufficient retirement benefits, and longer life expectancies are just a few of the reasons more seniors are turning to credit cards to meet everyday living expenses. But running up debt can lead to trouble, especially when you’re living on a fixed income, reports the Virginia Society of CPAs. Here, the Society offers six tips to help seniors stay out of debt.

1. You’re never too old to budget.

No matter what your age, a budget is an invaluable tool for managing money. Budgeting helps because when you decide in advance how much to spend in each of your budgeted categories, you’re more likely to stick to it. Take the money you save by curtailing your spending and put it in an emergency fund to cover unpredictable expenses, like car repairs. This way, you won’t have to resort to your credit card to cover those costs.

If you’re not sure where your money goes, try keeping track of everything you spend for a month or two. This will help you determine if you’re spending too much in a given area, such as eating out. Then take steps to trim back those expenses. Keep in mind that budgeting isn’t just about eliminating the extras. It’s also about becoming a smarter consumer and finding ways to save. For example, look into senior citizen discounts offered by hotels, restaurants, and retailers.

2. Get a part-time job or delay retirement.

Are you doing all you can to cut expenses and still having trouble making ends meet? Consider taking on a part-time job. If you’re still working and in good health, think about pushing back your retirement date by a year or two. This way you can earn and save more money. As an added bonus, by holding off on collecting Social Security, you will be eligible for a larger monthly payment when you do retire.

3. Implement a debt reduction plan.

Start by negotiating with each lender for a lower interest rate. Next, develop a plan for paying off either the accounts with the highest interest rates or the ones with the lowest balances. Pay off as much as you can each month — don’t fall into the trap of paying only the minimum payment due.

4. Borrow against the equity in your home.

Cash-strapped homeowners who qualify should look into a reverse mortgage. A reverse mortgage converts the equity you have in your home into cash. Instead of making payments to the lender, the lender pays you a monthly payment or a one-time lump sum payment, or grants you a line of credit you may use as needed.

The appeal of a reverse mortgage is that, unlike a home equity loan, you don’t need substantial income to qualify, and you generally don’t have to repay what you borrow. The loan comes due when the borrower no longer occupies the home as a principal residence. The repayment amount can never exceed the value of the home. However, keep in mind that with a reverse mortgage your equity in the house continues to decrease, unless your home's value is growing at a high rate. If you have the loan for a long time, or if your home's value decreases, you may completely deplete the equity.

Given the complexities of reverse mortgages, it is wise to consult with a CPA about your personal financial situation and needs.

5. Tap your life insurance.

A cash surrender loan may be a viable option for seniors who hold a permanent life insurance policy with a substantial cash value. A policyholder can take up to 96 percent of the cash value available in the form of a loan that does not have to be paid back. Bear in mind that if you choose not to repay the money, the death bereavement which will be paid to your beneficiary is lessened by the quantity of the outstanding borrowed amount balance and the accrued loan interest.

6. Ask for advice and guidance.

If you have a debt problem, don’t be too proud or embarrassed to admit it because you are not the only one in this type of situation. Talk to family members and ask for help in investigating financial, medical, food, and housing assistance programs in your community. You should also consult with a CPA who can help you devise a financial plan for staying out of debt.


The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at


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