MADISON, Wis. — More members above the age of 55, many driven out of the workforce by the economy, are turning to the credit union for assistance.
They're seeking loans to pay bills, budget counseling to pull themselves out of a downward financial spiral, and advice on how to manage healthcare costs having lost coverage from employers.
Credit unions and industry analysts say the trend is growing, as the combination of the economy and poor financial planning have Baby Boomers and even more senior members struggling to get by. The percentage of people over 55 who are unemployed has steadily risen from 3.3% in the first quarter of 2008 to 6.8% by September of 2009, according to the U.S. Bureau of Labor Statistics.
What's really changed is the mindset of many Boomers, especially those out of work, explained Jeff Hunt, consumer programs manager for CUNA Mutual Group's 55+ strategic market. "They are now in survival mode. Go back to early 2007 and look at Boomers' 401(K) plans and just their retirement readiness and the picture was pretty dismal then, with their average 401(K) balances around $38,000. Today their net worth has dropped by 41%."
Jeannine Moore, VP-marketing and business development at the San Francisco-based BALANCE, said the company's financial counselors are working with many more senior credit union members today. She said that on top of those losing work and struggling with bills are problems resulting from unscrupulous lenders. "A lot of older members are coming to us because they are caught up in high-cost payday loans, or are involved with expensive debt settlement companies that have scammed them."
But Moore said this group of members is less likely to default, as they "have a very strong desire to pay their bills from a moral standpoint, no matter what the circumstances are. Not all, but a lot of seniors believe the right thing to do is pay their bills."
Moore said that despite Boomers' years of managing money, credit unions are having to step in with counseling and "really get down to basics, looking at what is coming in and what is going out and talking about priorities."
Credit unions are working on the product end, as well, Moore said, with loan extensions and some "very needed things. Like looking at a car, credit card, and a personal loan, and rolling them all together into a new, more affordable loan, for example. They are really putting their necks out for older members who are going through this crisis."
In Schererville, Ind., the $143-million Advance Financial FCU is seeing a lot more activity from seniors for loans, according to, Marketing Director Samantha McClure. "We've been getting an average of two to three Better Than 50 Club loans per month. This was unheard of a year ago," she said.
At the $450-million Kemba CU in Cincinnati, Chief Lending Officer Duane Stacklin said his credit union has been doing more workouts for seniors, and is aware of the risk, given concerns about longevity and seniors' ability to land a new job. "It is a concern, but on the other hand if you don't work with them to do something you will get the deal back right away. So you do whatever you can to keep the car or whatever in their possession and make the terms reasonable so they can afford to pay."
Many older members are seeking loans to start their own business, pointed out Joe Saari, CEO of Precision Information, the Chula Vista, Calif.-based provider of interactive financial education products. "Many do not want to return to the traditional workforce. We are seeing a large number of people, maybe one to two million, who lost their job, got laid off, and received a settlement who want to redefine work on their terms."
If credit unions manage the risk here, Saari said, "I think there is a niche for them to fill this lending void for members 45 to 60 years old who have accumulated some assets and had a dream of starting a bakery or opening a restaurant."
Some members seeking to start their own business have been working through their CUs to take advantage of Precision Information's online Money Coach. "Money coach walks them through their financial goals, and also what it takes to start a small business," Saari said. "A lot of them are preparing for a major life change. So having information online seems to be quite popular with the older demographic."
