Older adults tend to be less in debt than younger people because people tend to pay off debt as they get closer to retirement. But in recent decades, each cohort of seniors has been in more debt than the last.
“There is a group of elderly people in financial need,” said Annamaria Lusardi, an economist at George Washington University. “They have high leverage; they carry expensive debts. They are approached by collection agencies. They are not going to enjoy their golden years.”
dr. Mudrazija and his co-author, Barbara Butrica, a senior fellow at the institute, used data from the national Health and Retirement Study and calculated that in 1998, about 43 percent of Americans over the age of 55 were in debt, a median of $40,145. In 2016, about 57 percent had debt and more: a median of $62,784, adjusted for inflation.
The proportion whose debt accounted for 30 percent of their total assets had risen to nearly 45 percent, and the proportion whose debt-to-asset ratio had reached a worrying 80 percent nearly doubled to 15 percent.
Although seniors in debt were more likely to have health problems, the type of debt mattered, according to the study, which was published by the Boston College Center for Retirement Research.
Secured debts, such as mortgages and other home loans, are backed by an asset: the home. Such debt rose among older borrowers as real estate prices rose and interest rates remained low. “It’s less and less the norm for people to pay off their mortgage before retiring, the traditional model,” said Dr. mudrazija.
But secured debt seemed less damaging to health than unsecured debt such as credit card balances, student loans, and medical delinquencies, which tend to have higher interest rates. About 24 percent of the debts of the elderly were unsecured in 1998; by 2016, the share had risen to 35 percent.
