NEW YORK–Americans over age 70 have seen a sharp increase in their total debt level over the past 20 years representing an increase of 543% to $1.1 trillion, according to new data from the Federal Reserve Bank of New York.
From 1999-2019, Americans in their 60s have also seen ballooning debt to $2.14 trillion, up 471%, according to the same data.
“While other age groups also saw their total liabilities increase over that period, the percentage increase experienced by seniors was most pronounced,” noted CNBC in its analysis of the Fed data. “Seniors have been ‘disproportionately harmed’ by a deterioration in the country's ‘modest social safety net,’ forcing older Americans to take on debt to make ends meet, according to a 2018 academic study on bankruptcy among seniors.”
The result of all that: a “precarious situation” for older Americans who are at risk of running out of money in retirement, added CNBC.
According to the Employee Benefit Research Institute, the percentage of households headed by someone over age 75 that had debt payments in excess of 40% of their income — a common barometer for determining if a family struggles with debt — increased by more than 23% from 2007 to 2016.
‘More Individual Responsibility’
“Americans have had to assume more individual responsibility for their finances, as employers have gravitated to high-deductible health plans and shifted from pension plans to 401(k) plans,” said CNBC. “Medical and higher-education costs have soared. Student loan debt for 65-year-olds increased 886% per person between 2003 and 2015, according to the New York Federal Reserve.”
In addition, increasing lifespans stretch savings and increase the likelihood older Americans will need costly long-term care.
All of that has led to "exponential" growth in the number of older Americans filing for bankruptcy, according to a 2018 academic study that found one-in-seven bankruptcy filers is over age 65 — a fivefold increase over the past 2.5 decades, the news outlet reported.
A Reminder
One retirement expert reminded payday loans, credit card debt and personal loans generally carry higher rates, greater than roughly 7% to 9%, and that near-retirees with a large share of such debt — say, between $25,000 and $50,000 or more — should consider delaying retirement to pay down those bills, he said.