Debt Levels Are Surging Among Older Americans

February 27, 2020

Total debt for Americans over the age of 70 has jumped 543% over the last two decades. Mortgages are a big part of that debt, according to a new report from the Federal Reserve Bank of New York.

Americans in their 60s also saw debt significantly increase in that time, rising 471%, the report shows.

Other age groups have also seen debt increases over that period, but the report authors note they haven’t been as pronounced as that seen by seniors. Some financial analysts are concerned that a rising number of the nation’s seniors are at risk of running short on money in retirement from their heavier debt loads.

Mortgages are accounting for the greatest share of debt among those in their 60s, followed by auto loans, credit cards, and home equity lines of credit, according to the report.

The percentage of households headed by a person over 75 who has debt payments that are more than 40% of their income rose by more than 23% from 2007 to 2016, according to research from the Employee Benefit Research Institute. That barometer is usually used to indicate whether a family is struggling with debt.

Longer lifespans may be one culprit that has stretched savings thinner. Also, medical costs have risen and student loan debt for 65-year-olds jumped 886% between 2003 to 2015, the report notes.

A higher number of older Americans are filing for bankruptcy, too. One in seven bankruptcy filers is over the age of 65, according to a 2018 study by professors from the University of Idaho, Indiana University Maurer School of Law, University of Illinois College of Law, and University of California-Irvine School of Law.

But financial analysts say that having debt in retirement isn’t necessarily a bad thing. “Ideally, people would go into retirement with all their debt in the rear-view mirror,” Glenn Downing, founder and principal at CameronDowning, a financial advice firm in Miami, told CNBC. “But sometimes it doesn’t work out that way.” The key is whether there is still cash flow in assessing whether retiring with debt will be OK, he adds.

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