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Recent research shows that individuals over age 65 are carrying more debt today than they did a decade ago. How might this reality play out as these older Americans enter retirement?
The number of Americans in or nearing retirement who are still holding significant mortgage, auto, even student loan debt has been rising in recent years. According to recent data released by the Federal Reserve Bank of New York, the average 65-year-old borrower has 47 percent more mortgage debt and 29 percent more auto debt than 65-year-olds had in 2003, after adjusting for inflation.1
One key takeaway from the trend, as cited by a Federal Reserve economist, is that since the Great Recession there has been a significant shift in the allocation of debt away from younger consumers with weaker repayment records to older individuals with strong repayment histories.2
While on the surface, this shift should not be cause for concern, if debt levels were to rise to the point where older Americans were struggling to repay debt as they entered retirement, the story could play out quite differently.
Is Debt an Obstacle to Your Retirement Readiness? The Employee Benefit Research Institute's annual Retirement Confidence Survey has consistently made a connection between the level of debt and retirement confidence. For instance, citing reasons why they are not saving (or not saving more) for retirement, workers pointed to their current level of debt as a key obstacle. Just 6 percent of workers who describe their debt as a "major problem" say they are very confident about having enough money to live comfortably throughout retirement, compared with 35 percent of workers who indicate debt is not a problem. Overall, 51 percent of workers and 31 percent of retirees reported having issues with debt.3
Types of Debt Held by Workers and Retirees
Type of Debt
Home equity line of credit
Loan from workplace retirement plan
Home improvement loan
Source: Employee Benefit Research Institute and Greenwald & Associates, 2015 Retirement Confidence Survey.
If you are concerned with the impact your current debt load may have on your ability to save for retirement or on the quality of your lifestyle once you retire, speak with a financial advisor now. Together you can craft a plan to lower and/or eliminate your lingering debt.
1,2The Wall Street Journal, "People Over 50 Carrying More Debt Than in the Past," February 12, 2016.
3Employee Benefit Research Institute and Greenwald & Associates, 2015 Retirement Confidence Survey.
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