January 2020

Artwork depicting depression

Credit Cards are the Most Stressful Debt

Debt is stressful. But did you know your stress level depends on the type of debt you have?

Credit cards cause far more stress than first mortgages and lines of credit, a study by Ohio State researchers finds. The more striking finding is that reverse mortgages, which allow people over age 62 to tap the equity in their homes, may reduce stress – at least temporarily.

The researchers used a simple example to illustrate the magnitude of credit card stress. Charging $640 on a card is as stress-producing as adding $10,000 to a mortgage. Credit cards are more stressful than home loans, because the balances on high-rate cards increase quickly when they’re not paid off, and the debt is not backed by an asset.

The researchers considered households to be debt-stressed if they said in a survey that they have had recent difficulty paying bills or have generally experienced financial strains.

This study focused on people over 62. As the share of older Americans carrying debt into retirement has increased, so have the amounts they owe. Debt arguably is very stressful for older workers, who have a dwindling number of years to get their finances under control before retiring, and for retirees, who have to live on fixed incomes.

The findings for reverse mortgages were nuanced – and interesting. Reverse mortgages create less stress than a standard mortgage and are much less stressful than consumer debt. On average, four years after taking out a reverse mortgage, the household’s stress level is 18 percent lower than it was at the time of the loan’s origination, according to the researchers, who did the study for the Retirement and Disability Research Consortium.

But things can change over time. Retirees often use federally insured reverse mortgages to pay off debt or as a regular source of income. But the amount owed on a reverse mortgage increases over time, because retirees do not have to make payments, and the interest compounds. (The loans are paid off when the owner either sells the house or dies.) …
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States Give Financial Help to Caregivers

On Jan. 1, Arizona residents caring for elderly or disabled family members became eligible for up to a $1,000 reimbursement from the state for expenses incurred in their caregiving responsibilities.

This is a trial program and the legislature allocated very little money – $1 million over two years – in a state with an estimated 800,000 residents caring for a disabled adult over 18.

But it’s a start.

Caregivers “aren’t asking for everything. They’re asking for a little bit to make their lives better,” said Elaine Ryan, vice president of government affairs for AARP, which has been on the forefront of advocating for such policies at the state level. “That’s the least we can do.”

Arizona’s program would defray a portion of caregivers’ spending. For older family members, this would cover technologies to aid older family members, such as hearing aids or computer programs, or shower grab bars and wheelchair ramps.

Graphic of caregiver expenses

Like Arizona, state governments around the country, as laboratories for policy experimentation, have passed a hodgepodge of programs to support caregivers. Other bills approved in recent years range from New Jersey’s tax credit for military families caring for wounded veterans to Oregon’s paid family leave program for workers taking care of aging spouses, parents and grandparents.

The programs are a tacit acknowledgment of the enormous financial strain caregivers face – a strain that is only expected to grow and, increasingly, to affect Millennials as their baby boomer parents age.

However, it’s not easy to pass bills that require states to approve financial assistance or tax credits, because the work done quietly by family caregivers is often invisible and under-appreciated by the general public and federal and state legislators. …Learn More