In recent decades, the burden of debt among older Americans has been steadily on the rise, raising concerns among retirement researchers. A federal Survey of Consumer Finances, released
this month, reveals a striking increase in the number of seniors grappling with various forms of debt.
Among those aged 75 and older, the percentage of individuals carrying debt in 2022 has surged to 53%, a significant jump from the 21% reported in 1989. A similar trend is seen in the age group of 65 to 74, where the proportion with debt has increased from 50% in 1989 to 65% in 2022.
This mounting debt load encompasses a wide array of categories, including mortgage debt, home equity lines of credit, car loans, credit card debt, and even student loan debt. While seniors do not necessarily carry more debt than other age groups, they encounter unique challenges when it comes to repaying it, given the constraints of fixed incomes and rising healthcare expenses.
Notably, not all forms of debt pose the same level of risk for seniors. Low-interest mortgages on appreciating properties are relatively safe, whereas high-interest credit card debt with surging interest rates can be a significant concern. Retirement advocates express worry about the overall impact of debt on seniors, as it can increase the likelihood of aging into poverty.
An alarming statistic is the rise in high-risk debt among seniors, particularly credit card debt. A recent study by the Center for Retirement Research at Boston College revealed that the share of households over the age of 65 with high-risk debt has climbed from 25% in 1989 to 43% in 2019. In 2022, 30% of those over 75 carried credit card debt, a stark increase from the 10% recorded in 1989.
The data suggests that many seniors resort to borrowing to cover large, unforeseen expenses, indicating a lack of adequate emergency savings. This trend is further highlighted by a study conducted by AARP, which found that nearly three in four Americans over 50 carry some form of debt, with a substantial portion dedicating a significant portion of their monthly incomes to debt payments.
While seniors generally carry less debt than their younger counterparts, they face greater challenges in paying it off. The average baby boomer, aged 59 to 77, carries $19,203 in non-mortgage debt as of the second quarter of 2023, slightly below the national average of $23,317. Mortgage debt for boomers averages $190,441, compared to the overall average of $241,815. Younger Americans have the advantage of more working years and increasing salaries, making it easier for them to manage their debt. In contrast, older Americans with debt are less likely to be employed, face health issues, and have limited avenues to augment their income.
Medical setbacks, like the one experienced by Liz Harriger, further exacerbate the challenges seniors face. Harriger, a 60-year-old with a newly acquired MBA, is burdened with over $70,000 in student loan debt and $2,800 in credit card debt due to a debilitating case of osteoarthritis. Unable to work for the past two years, she relies on withdrawals from her retirement account to make ends meet, and her boyfriend's support is the only thing preventing her from homelessness.
Adding to the financial strain on older Americans is the issue of medical debt, which has accumulated to over $50 billion among seniors. Additionally, there's a growing trend of seniors holding mortgage debt and auto loans, secured against their homes or vehicles, with the share of home-secured debt among those 75 and over increasing from 6% in 1989 to 28% in 2022.
The changing landscape of retirement finances is a matter of concern. Unlike previous generations who aimed to retire debt-free, today's seniors often opt to refinance their homes at attractive interest rates in their later years. While mortgage debt is generally considered low-risk, the possibility of losing one's home due to non-payment remains a significant concern.
In conclusion, the rising debt among seniors, particularly high-risk credit card debt, poses a troubling trend for retirement. With limited means to boost their income and a propensity to face unforeseen medical expenses, older Americans find themselves in precarious financial situations that warrant attention and action. Photo by jolmartyn, Wikimedia commons.