Aged Americans Now Carrying 543% More Debt Than They Did In 1999

• Recent figures have revealed that those over 70 years of age have 543% more debt than this age group did in 1999. Those in their 60s have also seen a 471% hike.
• Analysts believe the causes behind this dramatic increase include rising costs of living, including a hike in medical and higher education costs. Longer lifespans are also resulting in higher healthcare costs.
• Experts are now advising retired Americans to focus on maintaining a healthy cash flow that would allow them to comfortably cover everyday expenses while repaying debt obligations throughout their retirement.

According to data that has been reported by the New York Federal Reserve, the debt levels of aged Americans have increased dramatically in the past 20 years, making it increasingly difficult for them to manage personal finances during such a delicate time of their life.

Between 1999 to 2019, the total outstanding debt obligations on Americans over the age of 70 years increased by a staggering 543%, reaching a value of $1.1 trillion. Americans who are still in their 60s also witnessed an increase in their outstanding debt obligations, including mortgage loans and auto loans, by a massive 471%, reaching $2.14 trillion.

Although an increase in total outstanding debt has been witnessed in all age demographics, the increase in total debt owed by the older American population has been more significant.

According to a study conducted in 2018, the senior American population has been negatively impacted by the weakening of the country’s social security net, prompting many to take out expensive debt to cover basic expenses. According to another study by the Employee Benefit Research Institute, the likelihood of aged Americans running out of money during their retirement has also increased as more seniors are carrying some form of debt into retirement.

A household is said to be struggling with debt if the total debt makes up more than 40% of total household income. According to the EBRI, the number of households run by those aged 75 years and older that are struggling with debt increased by over 23% between 2007-2016.

With the passage of time, the onus of managing personal finances has shifted to each individual American, especially as employers have shifted to health plans with high deductibles, and switched to the 401(k) from pension plans. This seems to have deteriorated the personal financial condition of the average American. Additionally, costs pertaining to healthcare and higher education have soared as well, evident by the 886% increase in individual student debt payable by those in their 60s, according to data reported by the NY Federal Reserve.

Adding to the abovementioned problems is the extending lifespan of the average American. Longer lifespans will likely result in higher healthcare costs, which places greater strain on savings. Even if older Americans are able to find employment after retirement, the payout is usually very low and barely enough to cover basic expenses.

A 2018 study also revealed that the number of Americans that have filed for bankruptcy in old age has also grown exponentially. The study, conducted by a collaborative of professors belonging to various US universities, found that around 14% of all bankruptcy filers are over the age of 65, which is a fivefold increase compared to figures reported around 25 years earlier. This is only partially due to the increasing number of baby boomers reaching retirement age, according to the report, and largely due to increasing financial burdens.

However, experts believe carrying some debt into retirement is not an entirely bad idea, even though clearing all debt before that stage is ideal. The key to sustaining personal finances is ensuring the availability of sufficient cash flow. Experts recommend people reaching retirement age should ensure their income, from various sources including retirement benefits, would be enough to comfortably cover all expenses including debt repayment. As long as that remains true, senior citizens entering retirement with debt have no need to panic.

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