Not only do many older adults enter retirement with inadequate savings to sustain them in their golden years, upwards of 60% of them bring debt along as an “unwelcome traveling companion,” certified financial planner and financial journalist Hanna Horvath wrote for Next Avenue.
Horvath noted that the percentage of households headed by an adult aged 65 or older with any debt increased from 41.5% in 1992 to 51.9% in 2010 to 60% in 2016. Household debt rose to $31,300 in 2016, which was 2.5 times more than what it was in 2001.
“Debt is a major obstacle to the financial well-being of older adults in the United States, particularly those who experience poor health or economic insecurity,” according to the National Council on Aging. “Living on a fixed income can make it difficult to budget adequately to leave a cushion for emergencies. As such, unexpected costs — an unforeseen hospitalization,a vehicle requiring repair, or even emergency veterinary care for a sick pet — can plunge seniors into unmanageable debt.”
Rising healthcare costs in recent years also have contributed to seniors accumulating debt.
“It’s often hard to predict how much medical care will cost in retirement — and many Americans don’t save enough,” Horvath said, noting that traditional Medicare doesn’t cover hearing aids, some pharmaceuticals or the cost of long-term care.
“Many seniors rack up debt paying for critical medical care as their health declines,” Hovath added.
Unfortunately, about 3.5 million Americans carry student loan debt into retirement, either for themselves, a child or a grandchild, Horvath said, for a combined total of $125 billion in student loans.
Horvath recommends that retirees saddled with debt seek help to reduce the amounts owed. The National Council on Aging, for example, offers a free tool BenefitsCheckUp, to steer seniors toward programs and services that can help.
“Reducing these costs frees up cash to pay down debt. The tool also provides referrals to local assistance services,” Horvath said.
