This New York Times article discusses the allure of borrowing against pensions, which underscores an abrupt reversal in the financial fortunes of many retirees in recent years. The offers, known as pension advances, are having devastating financial consequences for a growing number of older Americans, both threatening their retirement savings and exacerbating mounting debt within this demographic.
1. Why are pension advances being scrutinized by Congress and the Consumer Financial Protection Bureau?
2. According to the New York Times survey of pension advances, what was the range of interest rates found?
3. In the article, Mr. Govan agreed to sign over $353 a month of his $1,033 monthly disability pension for five years in exchange for $10,000 in cash up front. Based on your calculations, how much is he paying in total interest and fees for the $10,000 loan?
4. What amount of average debt do people over 50 years of age carry on their credit cards?
Silver-Greenberg, J. (2013). Loans Borrowed Against Pensions Squeeze Retirees. The New York Times, April 27 (Retrievable online at http://www.nytimes.com/2013/04/28/business/economy/pension-loans-drive-retirees-into-more-debt.html?hp&_r=1&)