Families headed by someone at or near retirement have more debt than in decades past

American families headed by someone just reaching retirement or newly retired are more likely to have debt than similar households in the 1990s. And that debt is a higher amount than debt carried by those who were reaching or in retirement 30 years ago, according to a new report from the Employee Benefit Research Institute.

“While improving in many respects in the most recent years, the overall trends in debt are troubling in terms of retirement preparedness,” according to the report.

Housing debt continued to drive the level of debt payments in 2022, EBRI noted. 

“Higher debt-to-income ratios may represent more serious concerns for older families, who could be forced to reduce their accumulated assets to service the debt at points where their peak earning years are ending,” wrote Craig Copeland, director of wealth benefits research at EBRI. “However, if these older families with high debt-to-income ratios have low debt-to-asset ratios, the effect of paying off the debt may not be as financially difficult as it may be for those with high debt-to-income and high debt-to-asset ratios.”

Younger families had a higher probability of having debt and higher debt payments as a percentage of income, the report noted.

EBRI also looked at the role of race in debt-to-asset ratios. US families with Black or Hispanic heads “had higher but a similar likelihood of having debt.” Black and Hispanic families were more likely to have credit card debt but less likely to have housing debt than comparable families with white family heads. Housing debt is preferable to other forms of debt, as it “allow[s] families to build wealth through homeownership,” according to EBRI.

Copeland said that employers could help workers still a bit from retiring manage their debt through corporate wellness programs.

“This could reduce families’ risk of running short of money in retirement due to a potentially lowered likelihood of holding debt while in retirement. Therefore, with reduced financial liabilities, workers in these families could better focus on work and feel more secure in retiring,” he said.