With a contracting retirement income system, rapidly rising health-care costs, and the prospect of long-term care expenses, one would have thought that people approaching retirement would be paying off their credit card debt and closing out their mortgages. But surveys suggest that people are entering retirement with more debt than ever before and relying on borrowing to cover expenses in retirement.
According to the Federal Reserve’s Survey of Consumer Finances, in 2010 54% of pre-retirees and 41% of those 65-74 had a mortgage on their home. And the median amounts of these mortgages were not trivial – $97,000 for pre-retirees and $70,000 for new retirees. About 41% of pre-retirees and 32% of new retirees also had outstanding credit card balances (median balance about $2,200) and installment loans (median balance about $11,000). About 9% of pre-retirees and retirees faced debt payments that exceeded 40% of family income. [...]
The policy think tank Demos undertook surveys in 2008 and 2012 that highlight the changing pattern of indebtedness between those over and under age 50. Of households with debt, those over 50 saw their average balances decline by 16 percent compared to a 37-percent decline for those under 50. Older households frequently used their credit cards to manage daily living expenses and to cover contingencies such as car and home repairs as well as medical expenses.