More senior households are carrying high levels of debt
Article by: Reverse Mortgage Daily /August 7, 2024, By Chris Clow
More households led by older Americans who are either in or near retirement are carrying higher levels of debt. This has major implications for the nation’s retirement readiness posture, according to an issue brief published last week by the Employee Benefit Research Institute (EBRI).
“While improving in many respects in the most recent years, the overall trends in debt are troubling in terms of retirement preparedness, in that American families just reaching retirement or those newly retired are more likely to have debt — and higher levels of debt — than past generations, specifically those who were reaching or in retirement in the 1990s,” the brief stated.
One of the biggest culprits is credit card debt, EBRI explained. The overall percentage of families headed by someone age 75 or older who carry credit card debt has reached its highest level since the early 1990s. This is keeping financial issues top of mind for people throughout retirement when the likelihood remains much higher that these people will be living on a fixed income.
“Consequently, families with heads in their working years appear to need help managing debt, which could be accomplished through financial wellbeing programs provided by employers that help improve money management,” the brief stated.
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Such a move would help these households properly manage debt in retirement, improve their overall financial standing, and allow more older Americans to focus on working or feel more secure in retirement.
“This is even more pertinent for families with non-white family heads, as they have more debt, particularly credit card debt, relative to their assets than families with white, non-Hispanic heads,” EBRI explained..
The purpose of the brief was designed to focus on an element of retirement savings that is not as often discussed as the accumulation phase of savings, namely the impact of debt on the ability to sustain retirement. The data was derived from the 2022 Federal Reserve Survey of Consumer Finances, the most recent data that is available.