Think planning for retirement is difficult? Try living in retirement.
Today’s seniors are borrowing more to cover their expenses, and the number of seniors carrying debt has increased significantly, according to a new report from Arlington, Va.-based non-profit National Council on Aging,
In 2013, 61 percent of U.S. households headed by someone more than 60 years old reported having debt, according to the Federal Reserve Bank’s Survey of Consumer Finances. In 1989, about 44 percent of those households reported debt.
he average debt for households headed by someone 60 years old or older was $40,900, down from $52,513 in 2010, but still significantly larger than the 1989 average of $9,038, according to the Fed's survey.
“The trade-offs that seniors make to manage debt can have serious negative consequences on their health and financial well-being,” said Maggie Flowers, associate director for economic security at NCOA. “We need to recognize that debt is a problem among this population and help prepare older adults to better manage their future medical, housing and other daily expenses as they age.”
Debt not only harms seniors’ finances, but it directly impacts their lifestyles, according to NCOA, which cited a survey of aging-care professionals who said that seniors are foregoing home and car repairs, cutting their prescription pills and skipping meals to save money in the short term.
They’re also resorting to payday loans in higher numbers, NCOA said, with the number of senior households taking out payday loans increasing fourfold between 2007 and 2013, from 0.5 percent to 2.2 percent.
Medical debt poses the most significant barrier to seniors’ economic well-being, with more than 84 percent of people aged 65 or older coping with at least one chronic illness.
Credit card debt also weighs heavily on seniors, NCOA said, with 32 percent of senior households in the U.S. holding credit card balances, up from 27 percent in 2001.
Around one-third of seniors owed money on a mortgage or home equity line of credit, with 30 percent owing payments that exceeded one-quarter of their income.