Debt Becoming a Persistent Problem for Older Americans

Many older Americans are taking on debt at a time when they should be focused on savings and retirement investments, according to the Employee Benefit Research Institute.

A new report from the Employee Benefit Research Institute (EBRI) finds more and more late-career Americans are carrying problematic debt payment levels towards retirement.

EBRI says that for American families with family heads age 55 or older, the occurrence of debt has increased from 63.4% in 2010 to 65.4% in 2013, the latest year for which data is available. Compared with the1992 level of 53.8%, the 2013 level is up more than 10 points, EBRI observes.  

Even more troubling, EBRI says, is the increased percentage of older families with monthly debt payments greater than 40% of income—a traditional threshold measure of debt load trouble. The occurrence of problem debt loads increased in 2013 to 9.2% for Americans age 55 and older, EBRI finds, up from 8.5% in 2010.

The primary cause of rising debt loads seems to be Americans’ home purchases.

“Housing debt drove the change in the level of debt payments in 2013, while the non-housing (consumer) debt-payment share of income held stable from 2010,” notes Craig Copeland, EBRI senior research associate and author of the report. “Housing debt was the major component of debt for families headed by individuals ages 55 or older.”

Copeland adds that the increasing debt levels among those with housing debt have “obvious and serious implications for the future retirement security of these Americans.” EBRI suggests some families included in the report’s survey sample are at serious risk of losing what is probably their most important asset—their home—at the time retirement wealth should be approaching its peak. 

EBRI says it also found some positive news in that certain other debt measures improved in 2013 for older Americans.

For example, total debt payments as a percentage of income decreased from 11.4% in 2010 to 10.0 % in 2013, and average debt decreased from $80,465 in 2010 to $73,211. Further, debt as a percentage of assets decreased from 8.5% in 2010 to 8.1% in 2013.

Another positive, EBRI says American families with the oldest family heads remain the least likely to have debt. In 2013, for example, 78.5% of families with heads ages 55 to 64 held some debt, compared with 41.3% of those with heads ages 75 or older.

However, the percentage with debt increased from 2010 to 2013 for families headed by individuals in each age group studied. For those families with heads ages 55 to 64, EBRI says the percentage with debt increased from 77.6% in 2010 to 78.5% in 2013. Among those families with heads ages 65 to 74, the percentage with debt increased from 65.0% to 66.4%. For families with heads ages 75 or older, the increase was from 38.5% to 41.3%.

The full EBRI Notes report, “Debt of the Elderly and Near Elderly, 1992–2013,” is available online here.