Today Americans are more likely than ever before to have debt before retirement.
More than 70 per cent of people ages 56 to 61 were in debt in 2010, showed a recent study that appears in the American Economic Association Papers and Proceedings. The study analyzes the financial standing of people nearing retirement and their exit from the workforce, how that financial standing has changed over time, and how much of the Great Recession is to blame. To that end, the study compared debt levels among different generations when they were in the age range of 56 to 61.
How in debt are Americans nearing retirement? The researchers found that people who were 56 to 61 years old in 2010 (70 per cent of whom were in debt) carried a median debt balance of $32,700. The same age group in 1992 carried a median debt balance of $6,760. These values are adjusted and expressed in 2015 dollars.
What does this increased debt load for older American mean? It means that people will be forced to work longer. The average American retires in their early 60’s. However, with a heavy debt load it may not be feasible for people to retire until later in life: “Having to divert a greater share of one’s resources toward mortgages and credit card bills can also be especially difficult (potentially impossible) for those on a fixed income.”
Also, carrying debt later in life increases one’s chance of needing to file for bankruptcy protection. Annamaria Lusardi, the Denit Trust Chair of Economics and Accountancy at the George Washington University School of Business, and a co-author of the recent study pointed to another study that shows bankruptcy filings are growing fastest among people over the age of 65.
Why are older Americans more in debt than ever before? The answer to this questions is multifaceted. A few things that certainly contributed to increased debt was the increase in housing costs during the early 2000s and the ease of borrowing during that time period. As housing prices increased to levels previously unseen, lenders were requiring smaller down payments and mortgages were increasingly available to borrowers―even with low credit scores or few financial resources. Not only were mortgage’s easier to secure, so too were high-limit credit cards and loans against collateral, like second mortgages, Home Equity Lines of Credit, and auto title loans.
Lusardi said, “Retirement today will have to do not just with accumulating wealth, but managing debt.”
Relief From Debt
If you are struggling to manage your debt load, we encourage you to explore if filing for bankruptcy protection is the right solution for you.
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The Law Office of Barbara B. Braziel helps people get out of debt. We offer free consultations to people of Savannah, GA and the surrounding areas, including Richmond Hill, Hinesville, Pooler, Port Wentworth, Tybee Island, Clyo, Ellabel, Midway, Ludowici, Springfield, Pembroke, Brooklet, and Garden City.
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