More Seniors Carrying Debt into Retirement

Near retirees have significant amounts of housing and credit card debt

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An increasing number of Americans are entering their retirement years with debt. Some 63 percent of American families with a head age 55 or older had debt in 2007, up nearly 10 percentage points from 1992, according to an Employee Benefit Research Institute analysis. The median debt level increased from $15,923 in 1992 to $43,000 in 2007, in 2007 dollars.

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“American families just reaching retirement or newly retired are more likely to have debt—and significantly higher levels of debt—than past generations,” writes Craig Copeland, the author of the study. More older Americans also have excessive debt, which exceeds 40 percent of their income. Some 13 percent of Americans between ages 55 and 64 have extreme amounts of debt, up from 8 percent in 2004. And among those age 65 to 74, the amount of excessive debtors rose from 8 percent to 11 percent during the same period.

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Housing was the biggest contributor to growing debt levels. The proportion of families age 55 or older with housing debt increased from 24 percent in 1992 to 40 percent in 2007. The median amount due on a home was $79,000 in 2007, up from $65,898 in 2004. “The sharp increase in housing debt was due to many homeowners refinancing their mortgages, cashing out equity in their home, or facing rapidly increasing home values during 2001 to 2007, when buying a home,” Copeland writes. “Older families that take on higher housing debt are likely to have difficulty avoiding a major lifestyle change in living arrangements for the remainder of their retirement, if they are or were planning to rely on their home as an asset.”

More older Americans also carry credit card debt into their retirement years. Some 38 percent of Americans age 55 and older had a credit card balance in 2007, up from 31 percent in 1992. The median amount owed also increased from $2,197 in 2004 to $3,000 in 2007. Those age 55 to 64 charged the most, reaching $3,600 in 2007.

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Debt levels are likely to have grown since this data was collected. “These measures of debt have almost certainly significantly worsened from these already record levels,” says Copeland. “Consequently, even more near-elderly and elderly families are likely at risk for severe changes in lifestyle after retirement.”