Senior citizens carrying more debt, mostly from mortgage

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Senior citizens have a reputation for being frugal and saving for rainy days, yet in recent years more Americans who are either in retirement or approaching retirement age seem to have developed a taste for debt.

It can be difficult for older people living on fixed incomes to pay off debt. With many trying to live up to their values about repaying what they owe, that can mean scrimping and scrounging to make payments while depriving themselves of food, medical treatment and money for emergencies.

"People have gone into older age with more debt and now have to service it at a time when their income is stagnant or they lost a job before they had intended to," said Craig Copeland, a senior research associate at Washington, D.C.-based Employee Benefit Research Institute and author of a recent report on debt of the elderly.

The study found American families headed by individuals age 75 or older had increased their use of debt and the average amount of debt they had in 2010, the most recent year for which data is available. For families with heads of household age 75 or older, the average debt level increased from $13,665 in 2007 to $27,409 in 2010.

The percentage of elderly households with debt payments greater than 40 percent of their income also grew.

The average debt of households headed by individuals 55 and older stood at $75,082 in 2010, up more than $1,300 from 2007.

The main driver of debt for families with a head age 55 or older was housing, according to the study, which found almost three-fourths of all debt payments going to that bill.

"These debt results are troubling as far as future preparedness is concerned, in that the data indicate that American families approaching retirement or newly retired are more likely to have debt -- and higher levels or debt -- than past generations," Mr. Copeland said.

"Older families that have taken on higher housing debt may well eventually have difficulty avoiding a major lifestyle change in living standards in retirement, certainly if they are planning to rely on their home as an income producing asset."

While senior citizens on fixed incomes are more vulnerable, housing costs are taking a toll on everyone across the board, according to the State of the Nation's Housing 2013 report released last week by Harvard University's Center for Housing Studies.

The report found more than 43 million U.S. households pay excessive shares of their income for housing. Thirty-seven percent of all U.S. households are overburdened by housing costs, paying out monthly more than 30 percent of income -- the housing affordability benchmark -- just to keep a roof over their heads.

Squeezed by historically low interest rates on bank accounts and a volatile stock market, more seniors also have resorted to using debt to fund their medical and lifestyle needs.

Financial adviser Curt Knotick, owner of Accurate Solutions Group in Butler, said he does not believe today's seniors have a new attitude of acceptance of debt as much as it is simply a necessity to make ends meet.

"Seniors today are finding they have more days in the month than they have income, and to make ends meet, they are relying more and more on debt. There has been a war on savers over the past four years with the Fed's zero interest rate policy," he said.

"Couple that with increasing costs of living and entering retirement unprepared, with low savings and investment balances, and the need for debt to simply maintain their monthly budget is real."

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Tim Grant: tgrant@post-gazette.com or 412-263-1591.


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