Older adults carry more consumer debt into their later years than ever before, including mortgage, credit card, and even student loan debt.
Americans age 50 or older had significantly more debt in 2016 than in 1989, according to a 2021 Government Accountability Office (GAO) report. For example, the GAO found that older households carried about three times more debt in 2016 than in 1989. The increase in debt burdens is jeopardizing the financial security of millions of older people as their income usually decreases while medical expenses increase.
As a result, the long-term retirement security of many families is at risk. AARP surveyed working families in April 2021 and found that the two main barriers to people saving more for retirement are the lack of money (55 percent) and debt payments (44 percent). The consequences can be even greater for older families carrying debt into their retirement years. When this occurs, it can be difficult to keep up with monthly payments.
AARP estimates that among families that have debt, about one in ten families with a head of household age 50 and older faced a debt burden greater than 40 percent in 2019. This means families must devote over 40 percent of their gross income to debt payments. After also paying for other expenses, like taxes, food, medical care, and utility costs, many families have little, if any, income left for other purposes. Older Black and Hispanic/Latino families face much higher debt burdens than older white families.
Growth in debt carried by older families headed by someone age 75 and older is particularly troubling. The percentage of families in this age category carrying debt more than doubled between 1998 and 2019, from 25 to 51 percent.
Another sign of debt stress among older Americans is their rising bankruptcies. The rate at which older adults filed for bankruptcy tripled between 1991 and 2016. A key reason for the increase in bankruptcy filings among older adults is the shift away from defined-benefit pensions and reductions in social safety net programs.