Average debt held by older households has jumped 39% over the past decade
US retirement savers may want to turn to their seniors for a word of caution about accumulating debt: it could go with you into your golden years.
The share of people aged 75 and over who head a household and are in debt has jumped to 51.4% in 2019, from 41.3% in 2013 and 31.2% in 2007, according to a new study by the Employee. Benefit Research Institute. In the 65 to 74 age group, 70% were in debt last year, up from 66.4% in 2013 and 65.2% in 2007.
While some of that may have changed in 2020, families headed by someone aged 75 or older have seen growth in both median housing debt and median credit card debt over the year. last, according to the study.
“Even before the pandemic, these households still carried more debt than in previous years,” said Craig Copeland, senior research associate for the institute and author of the report.
“It’s not a place that you can easily recover from,” Copeland said. “It’s not like you can easily find a job at this age and get back on track.”
The median income of people in this age group who are not working is about $ 20,500, according to the Pension Rights Center.
The average aggregate debt of households headed by people aged 75 and over rose 38.8% to $ 44,828 in 2019, from $ 32,294 in 2010, according to the study. This compares to a decrease in the 65- to 74-year-old age group to $ 73,397 last year, from $ 83,505 in 2010.
Similarly, the share of income devoted to debt repayment rose to 7.3% among the oldest people, against 4.5% in 2007 (although lower than 7.7% in 2004). According to the study, around 5% of the oldest people have debt repayments that exceed 40% of their income.
In addition, while non-housing debt as a percentage of income was less than 2% in the 75 and over cohort compared to other people aged 55 to 74 (with the exception of 2004), it is now in line with them, increasing by 3%. .
Research notes that workplace financial wellness programs that include money management skills can benefit individuals during their working years, which would likely help them as they transition into retirement.
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“The focus is on building assets, the amount you should have in your 401 (k), but you should also look at the other side of your balance sheet,” Copeland said.
He said that while it’s good to contribute to your retirement savings, also watch out for short-term issues, which means having a cash cushion and avoiding credit card debt as best you can.
“One problem the pandemic has highlighted is that many people do not have emergency savings to tap into,” Copeland said. “People couldn’t even get through the first few months of this with no stimulus money and no unemployment, and it lasts almost a year.”