A historically large share of retirees have credit card debt, recent reports show, a sign of financial instability that worries retirement researchers. · More than two-fifths of retirees carry balances on their credit cards, according to the 2024 Spending in Retirement survey, released in November by the nonprofit Employee Benefit Research Institute, or EBRI.
· Retirees are more likely to have credit card debt than any other kind. Roughly six in 10 retirees had debt in 2024, according to the EBRI report. Of that group, 68% had credit card debt, 38% had mortgage debt and 34% had car loans, the three most common types. · The share of older Americans with debt has risen over the decades. Among people 75 and older, 53% of households reported debt in the 2022 Federal Reserve’s Survey of Consumer Finances, up from 21% in 1989.
Among survey participants 65 to 74, the share who had debt rose to 65% in 2022 from 50% in 1989. (Contrary to the broader trend, the quotient of those seniors with debt ticked down slightly between 2019 and 2022.)
According to the 2024 EBRI report and others, credit card debt is more pervasive among seniors than other kinds of debt. In the federal survey, 30% of over-75 households reported credit card debt in 2022, up from 10% in 1989.
“If you can’t meet your basic needs – and you know that more and more older adults can’t meet their basic needs – you’re more likely to rely on credit,” said Jessica Johnston, senior director of the Center for Economic Well-Being at the nonprofit National Council on Aging.
Dual challenge: Inflation, high interest rates
Seniors are struggling with credit card debt at a moment when retirees, along with the rest of America, face dual economic challenges of inflation and elevated interest rates.
Unlike younger Americans, however, retirees tend to live on fixed incomes. They cannot, as a rule, go out and find a higher-paying job to manage their debt.
“Essentially, the only way you can pay it down is to reduce your standard of living,” said David John, a senior strategic policy adviser at the AARP Public Policy Institute.
Newly minted retirees are more comfortable with credit cards than their forebears, John said, because they grew up with them. Bank-issued credit cards became pervasive in the 1980s when the youngest baby boomers entered their 20s.
“What we have now is a higher proportion of people who have used credit cards as part of their financial life throughout their careers,” John said. “It’s going to be natural for them to continue to use credit cards.”
American retirees’ finances are ‘precarious’
The new EBRI report portrays the overall financial state of retired Americans as “precarious,” said Bridget Bearden, research and development strategist at the nonprofit and author of the study. The survey covered retirees from 62 to 75.
And credit cards aren’t the only problem researchers identified for this demographic.
In the 2024 survey, 31% of retirees said their spending level is higher than they can afford. In a 2020 version of the survey, by contrast, only 17% of retirees reported overspending.
The median retiree in 2024 reported just $25,000 in assets, apart from real estate equity.
But retirees report plenty of debts. And every kind of debt seems to be getting more expensive.
The average credit card interest rate rose from 14.6% in February 2022 to 21.8% in August 2024, according to federal data.
The average rate on a 60-month loan for a new car is 8.4%, as of August, up from 4.6% three years prior.
The average 30-year mortgage rate stands at 6.7% this month, up from 3.2% in January 2022.
Debt puts retirees at risk of financial crisis
All that debt, researchers say, puts retirees at risk of financial meltdown.
“You could have to declare bankruptcy,” said Siyan Liu, a research economist at the Center for Retirement Research at Boston College. “You could be pursued by debt collectors. You could potentially lose your house. A lot of this is the kind of stress that you want to avoid in retirement.”
In a 2023 paper, Liu and her colleagues estimated that 43% of all 65-and-over households were “high-risk borrowers,” as of 2019, up from 25% in 1989.
‘Good’ debt and ‘bad’ debt
Retirement researchers think of some debt as good and other debt as bad.
“Credit card debt would be bad,” said Liu, from Boston College. “It has a very high interest rate, and it compounds really fast.”
Mortgage debt could be good for a retiree, at least in theory.
Many older Americans refinanced mortgages in recent years, leveraging historically low rates. Some of those households refinanced without cashing out equity, which means they did not greatly increase the balance of the loan.
But not all mortgage debt is good. If you take out a new 30-year mortgage at age 60, no matter how attractive the rate, you will probably be paying it off until you are 90, if you live that long.
Home values have soared in recent years. That means larger mortgages and higher taxes and insurance premiums, and those expenses could be an issue for a retiree on a fixed income.
“Older people now are much more likely to have mortgage debt or car debt,” said John of AARP. “That is fine, as long as you have a relatively stable financial situation. But if circumstances change, that could become a problem.”
Other recent surveys have found retired Americans increasingly concerned about their finances.
A November report from the nonprofit Transamerica Center for Retirement Studies revealed a deep well of unease about retirement funds. Only half of retirees surveyed said they had built a large enough nest egg for their retirement. And nearly half said they were paying off debt, especially credit card debt.
Prevalent credit card debt “is a trend that we’ve seen in our research for some time,” said Catherine Collinson, CEO of the Transamerica nonprofit.
“Older generations have been very skeptical about credit cards,” she said. “And they have become ubiquitous for our generation, and younger generations.”
Back in the 1980s, consumers often applied for credit cards on paper forms and waited for a response by mail, said Bearden, author of the EBRI report.
Today, credit is available to retirees with the click of a button.
“The ability to pay for things on your phone, on your watch, has just blossomed for this generation,” she said.