What happens to our debt when we die?

Our children, spouses, relatives and even our creditors get stuck with the bill.

The ugly truth is that more and more Americans are incurring debt with no plans on paying it back before they pass away. Ultimately this debt- for mortgages, medical expenses and even student loans- will cut into retirement plans. And with the proposal to raise the retirement age to 69, that will give individuals even more time to rack up credit card bills.

On Wednesday the national nonprofit organization, CESI Debt Solutions, released a survey of over 200 Americans that found that almost 40% of retirees are not worried about paying off their debts during their lifetimes. That includes debts incurred both before and during retirement. Meanwhile, 56% of retirees had outstanding debts when they left the workforce, yet 96% refused to delay retirement because of their debt. Even scarier, 59% of those surveyed had saved less than $50,000 toward retirement.

“I think there is such an entitlement attitude,” said Keith Weber, CFP and author of “Rethinking Retirement: How to Create the Life you Want Without Waiting to Retire,” in a phone interview on Wednesday. “Culturally Madison Avenue has done such a good job convincing people they should be allowed to indulge themselves in certain things. For people who are feeling somewhat hopeless anyway in terms of retirement, at that point what do they have to lose?”

While retirees use their credit cards for luxury purchases such as vacations, entertainment and clothing, 53% say they use credit cards to buy medicine, pay for visits to the doctor and hospital, and for other medical expenses as well, according to the survey.

On Wednesday MetLife released a poll of more affluent investors, those with $200,000 or more in investable assets, revealed that 35% of those polled had to borrow funds from various sources – including credit cards – to pay for an unexpected expense of $2,000 or more in the past year. To be sure, some do want to cut their spending, but even amongst those that do reducing spending is not an easy choice. Forty nine percent say that if they cut discretionary spending by 10% or less it would mean a dramatic change in lifestyle.

“Unfortunately, we are continuing to become a society of those who are pulling the cart versus those who are riding in the cart,” said Weber. “I think it will take a whole mindset change. We in financial services don’t have the products to solve the problems.”

CESI’s survey found that when Americans retire: 35% owe money to credit cards, 30% to their mortgage, 19% to car loans, 4% to student loans, and 11% to other. Seventy five percent said they went into debt once they were retired due to medical and funeral expenses.

The survey found 51% of those planning to retire soon are considering delaying retirement until the economy improves while only 57% believe they will be debt free before retirement.

 “Most people are too scared to talk about their financial problems especially in their ‘golden years,’” said Neil Ellington, Executive Vice President of CESI, in a statement. “Retirement is supposed to be all about enjoying the time you’ve been saving up for and the reality is many people couldn’t save enough. The golden years can’t be golden if you’re sinking in a sea of red ink.”