Elderly African American couple trying to figure out their finances.

Debt Levels for Households Nearing Retirement Decreasing, But Still High Compared to Past Generations

By Craig Copeland, Senior Research Associate, Employee Benefit Research Institute

Are you approaching retirement age and still carrying debt, including credit card balances? Are you working to pay off your debt before you retire? 

Recent analysis of data from the Federal Reserve shows that while the current generation of individuals approaching retirement are making headway in reducing their debt, they are still are carrying more debt than earlier generations.

Evidence from the Federal Reserve Board’s Survey of Consumer Finances (SCF) paints a mixed picture of trends relating to debt levels of families with a “near elderly” head—those age 55 to 64. By many measures, the debt burden has improved for this demographic group since the Great Recession. At the same time, in many ways, this family cohort shows higher levels of indebtedness than families with older heads. Also, as with many of the families with elderly heads examined in the SCF, the families with a near-elderly head show a pattern of stubbornly higher indebtedness than in past generations—specifically those in the 1990s.

Debt Levels:

  • As with most families with elderly heads, the families with nearly elderly heads have experienced a decline in debt levels as a percent of their assets since 2010—from 10.7 percent to 8.4 percent.
  • Total debt payments to income levels of families with near elderly heads have been trending down since 2007 and are at their lowest levels in two decades (9.1 percent). However, this level is still higher than that of families with older heads, which range from 6 percent to 8.2 percent.
  • More than three-quarters of families with a nearly elderly head held debt in 2016 (77.1 percent). While this level represents a downward trend from 2007 when it was 81.7 percent, it remains higher than the proportion in 1992 (71.4 percent). The family head age cohort with the next highest percentage with debt were families with heads ages 65-74, where the percentage with debt ranged from 51.5 percent in 1992 to 70.1 percent in 2016.
  • The proportion of families near-elderly head with debt payments that are greater than forty percent of their income is also down substantially since 2007 (8.5 percent in 2016 versus 12.5 percent in 2007). However, this cohort is more likely to have debt payments in excess of 40 percent of income than any older family head cohort.

Credit Card Debt:

  • The percentage of families with heads age 55-64 that have credit card debt declined in 2016 to 41 percent, which is well below the peak level of 50 percent in 2007. This, however, remains higher than the proportion in 1992, which was 37 percent.
  • The median credit debt for families with heads age 55-64 decreased significantly in 2016 from $4,168 to 2007 to $2,800 in 2016. However, this is still higher than the 1992 level of $1,676, and the highest of any of the older family head cohorts.

“Research like this helps us understand the risks those nearing retirement run when it comes to retirement preparedness,” says EBRI President and CEO Lori Lucas. “It is ASEC’s mission to educate people on how to improve outcomes by managing debt levels so they have the ability to save for their long term financial security.”


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@EBRI discusses the debt status of the generation approaching retirement, and how such trends help financial capability organizations serve their constituents >> http://bit.ly/2F79JkN @AmericaSaves

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