NCPA - National Center for Policy Analysis

Debt Is Becoming a Growing Problem in Retirement

April 24, 2015

According to the Consumer Financial Protection Bureau, the percentage of homeowners 65 and older with mortgage debt increased from 22 percent in 2001 to 30 percent in 2011. Among those 75 and older, the rate more than doubled, from 8.4 percent to 21.2 percent.

In addition, the Employee Benefits Research Institute (EBRI) says U.S. families carrying the highest levels of debt were those with heads of household aged 55 to 64. They had an average debt level of $107,060 in 2010.

For an age group nearing retirement, that is not a good thing. Moreover, that may be why Baby Boomers' confidence in having sufficient savings to last through retirement dropped to a five-year low. An Insured Retirement Institute survey reports only 27 percent of Boomers are highly confident that their savings will last.

Thomas Anderson, author of The Value of Debt in Retirement, says there are actually three kinds of debt:

  • Oppressive debt — credit card debt or payday loans — has interest rates higher than 10 percent.
  • Working debt includes mortgage debt, which usually has 3-5 percent interest rates.
  • Enriching debt is debt people choose to take on but have the money to pay the balance.

However, mortgage debt can be the biggest issue for retirees and planners are mixed on whether it is better to pay off a mortgage or keep it for the tax benefits. On average, those entering retirement do so with an average of $100,000 in mortgage debt.

Source: Rodney Brooks, "Get Rid of that Debt Before You Retire," USA Today, April 22, 2015. 


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