When you’re retired, handling debt can be even more challenging than it was when you held a full-time job. But a large percentage of senior citizens in the U.S. find themselves still paying back loans, MarketWatch Guides research finds.
Key Findings
- Adults aged 65 to 74 hold an average of $134,950 in debt, while seniors 75 and older hold an average of $94,620 in debt.
- Sixty-eight percent of adults 65 and older didn’t pay their medical bills in full because they expected their health insurance to cover the costs, while 44% weren’t sure they received an accurate bill.
- The average American over age 65 had $13,800 in medical debt in 2020.
How Many Seniors Are in Debt?
In 2022, the average debt of consumers aged 65 to 74 was $134,950, according to the latest Federal Reserve data, compared to $94,620 for those 75 and older. Average assets – which factors in home values – peaked in 2022 at just under $1.9 million for consumers 65 to 74 and $1.7 million for persons 75 and up, the Fed data shows.
Nearly 65% of Americans 65 to 74 held debt in 2022, compared to about half of seniors 75 and older who held debt. In comparison, less than half of the population aged 65 to 74 held debt in 1989. That same year, only 21% of older adults 75 and up were in debt.
What Types of Debt Do Seniors Have?
Adults 65 and up carry many different kinds of debt, including mortgages, credit cards, personal loans and auto loans, Fed data shows.
Mortgages
Consumers aged 65 to 74 held an average of $175,670 in home loans in 2022, per the Federal Reserve data. This balance has fallen slightly over the past few years: The average mortgage amount decreased marginally from 2019, and there was a 9.6-percentage point decrease in the percentage of adults 65 to 74 who owed on their homes between 2013 to 2022.
However, nearly a quarter of adults aged 75 and older held mortgages in 2022, the highest percentage since 1989. The average mortgage balance among these older adults decreased from $144,910 in 2019 to $138,700 in 2022.
Installment Loans
The 75 and older population carried $22,740 in average installment debt in 2022, roughly $6,000 less than those aged 65 to 74. Installment debt includes personal loans and other loans with a fixed monthly payment.
Over a third of people between 65 and 74 held installment loan debt, compared to less than a quarter of people age 75+.
Car Loans
Less than a quarter of adults 65 and older held vehicle installment loans in 2022, and the percentage of adults of retirement age who had a car loan has decreased since 2019. While the average car loan debt has decreased for those 75 and up, it has increased for those between 65 and 74 years.
Credit Card Debt
Just under 34% of seniors 65 to 74 carried a credit card balance, with an average of $7,700, according to the Federal Reserve. Older seniors fared better: 29.8% of adults 75 and older held a balance, and their average was about half that amount. While the percentage of credit card debt holders among populations 65 to 74 has decreased since 2016, the same debt among those 75 and older has increased since 2013.
Senior Medical Debt
Nearly 4 million people (7%) aged 65 and older reported unpaid medical bills in 2020, according to the Consumer Financial Protection Bureau (CFPB). Unpaid medical bills increased for both insured and uninsured seniors from 2019 to 2020.
Older populations with Medicare and Medicaid coverage were more likely to report unpaid medical bills than seniors as a whole. Indeed, 68% of adults 65 and older with outstanding medical debts were covered by two or more insurance providers, the CFPB report found.
However, a national survey by health research firm KFF revealed that 44% of seniors weren’t sure the bills they received were accurate. In addition, 68% of them didn’t pay their medical bills in full because they expected their insurance carrier(s) to partially or fully pick up the tab.
This uncertainty can impact your life. The Sycamore Institute determined that there’s a link between those who struggled with medical debt and a shorter life expectancy, worsening mental health and hypertension. AARP’s 2023 Debt Survey also showed that, among adults who categorized their debt as a major issue, three in four felt stressed, and more than half felt depressed due to their debt.
“The cost of health care can create a financial burden on families, especially on older adults in the mid-income category,” Dr. Karen Zurlo, associate professor of social work at Rutgers University, told MarketWatch Guides. However, seniors can benefit from multiple medical debt repayment options, including:
- Asking about and clarifying charges ahead of a scheduled appointment or procedure
- Inquiring about financial assistance, charity care and hardship or payment plans
- Researching medical credit cards or personal loans
- Speaking to a debt specialist or nonprofit credit counselor
If you don’t feel comfortable negotiating with creditors and debtors directly, be cautious about which debt settlement firms you hire, experts we spoke with said. Many may advise risky behaviors — such as stopping payments — that can negatively affect your credit report.
“Impaired or reduced cognitive abilities may also increase the likelihood of them being a victim of scams and fraud where criminals commonly prey upon individuals who may be easily confused, socially isolated, or too embarrassed to seek help or admit they have been taken advantage of,” said Dr. Jesse Jurgenson, assistant professor of practice in the School of Financial Planning at Texas Tech University.
How to Prepare For Retirement When You Have Debt
With total consumer debt skyrocketing past $17 trillion last year (a 4.4% increase), according to Experian, saving for retirement remains more critical than ever. We spoke to several industry experts to clarify how individuals of all ages can prepare for retirement while carrying debt.
Create a Budget
According to the Center on Budget and Policy Priorities, Social Security benefits for retired workers totaled just over $22,000 annually as of July 2023, leaving little room for extra expenses. So creating and following a monthly budget can help seniors better manage their finances for the future by knowing exactly what is coming out of their checking accounts monthly.
Prioritize Debt Repayment
Aggressively mapping out a strong debt repayment plan well before retirement can help seniors ease into a less financially burdened income. “Financial assets at age 40 are one of the strongest predictors of longevity,” said Dr. Peter Lichtenberg, director of the Institute of Gerontology and a psychology professor at Wayne State University. Pairing such an approach with strict savings habits can also reduce financial worries.
Maximize Catch-Up Contributions
Although contributing to your retirement account can help you prepare for later in life, catch-up contributions can accelerate your retirement savings. Once you’ve met your annual contribution maximum, catch-up contributions allow you to increase your savings and maximize employer match, if applicable. Annual catch-up contribution limits vary by retirement plan type, but the majority allow up to $7,500 in the 2023 and 2024 tax years. Other savings options such as high-yield savings accounts are also ways to maximize your savings.
Debt Relief for Seniors
Decreasing debt among those 65 and older can reduce the financial burden and give seniors peace of mind. Minimizing financial obligations may include downsizing, consolidating debt, obtaining credit counseling, or declaring bankruptcy.
Downsizing
“It is important for seniors to remain as independent as possible as they age,” Zurlo said. And downsizing is a way that they can do that. In addition to reduced mortgage costs, seniors may benefit from additional socialization, a safer environment, and around-the-clock qualified medical care by moving into a smaller home or an assisted-living facility.
Debt Consolidation
Consolidating debts can help seniors better manage their financial obligations as they age. However, with the help of one or more family members, adults 65 and older can minimize and simplify debts to result in fewer, more memorable due dates. Common methods of debt consolidation include balance transfers, home equity loans, and debt consolidation loans, according to the CFPB.
Credit Counseling
Consolidating debt works well with a higher credit score, so credit counseling may benefit seniors struggling to improve their credit history. “Professional financial planners or counselors can offer tailored guidance to navigate financial challenges at different life stages,” said Dr. Su Shin, associate professor in the Department of Family and Consumer Studies at the University of Utah.
Bankruptcy
Seniors who have been struggling with their finances may have no choice but to file for bankruptcy, but it’s vital to consult an attorney before you file. While family members can attempt to speak to creditors about their aging loved one’s situation, bankruptcy should remain a last resort.
The Bottom Line
Similar to most consumers, seniors struggle with debt throughout their lives. However, unpaid medical debt remains most prominent among consumers 65 and older, especially considering its damaging effects on physical and mental well-being. These circ*mstances further reinforce the gravity of saving for retirement and prioritizing debt repayment earlier in life.
Our Experts
Dr. Jesse Jurgenson, assistant professor of practice in the School of Financial Planning at Texas Tech University
Jesse B. Jurgenson, Ph.D., AFC®, is an assistant professor at the Texas Tech University School of Financial Planning. He additionally serves as the director of the Charles Schwab Foundation Personal Financial Planning Clinic, which connects emerging financial planners with members of the community for pro bono financial coaching and education. He is an Accredited Financial Counselor (AFC®) from the Association for Financial Counseling and Planning Education (AFCPE) and holds graduate degrees in human development, family science and personal financial planning along with a Ph.D. from Iowa State University.
Dr. Su Shin, associate professor in the Department of Family and Consumer Studies at the University of Utah
Dr. Su Shin has served as the director of the financial planning and counseling program since 2021. She earned her doctoral degree in family resource management from the Ohio State University in 2016. Dr. Shin is a certified financial planner and an active member of both the national and Utah-Idaho Chapter of the Financial Planning Association (FPA).
Dr. Peter Lichtenberg, director of the Institute of Gerontology and a psychology professor at Wayne State University
Peter A. Lichtenberg, Ph.D., received his bachelor’s degree from Washington University in St. Louis, and his master’s and doctorate in clinical psychology from Purdue University. After his internship, he completed a postdoctoral fellowship in geriatric neuropsychology at the University of Virginia Medical School where he also became a faculty member. Dr. Lichtenberg, one of the first board-certified clinical geropsychologists in the nation, is a nationally recognized expert in the areas of financial capacity and financial exploitation among older adults. He has authored seven books and over 200 scientific articles in geropsychology. He served as the president of the Gerontological Society of America in 2022, and was the chairman of its board of directors the following year.
Dr. Karen Zurlo, associate professor in the School of Social Work at Rutgers University
Dr. Zurlo’s research focuses on the economics of aging with a sub-focus on health-related outcomes. She conducts qualitative and quantitative research on mid-aged and older adults that focuses on financial outcomes, chronic conditions, functional impairment, and mental health. Dr. Zurlo is also interested in income inequality among older adults and how health status and economic resources interact to shape late-life outcomes. Her research includes investigations related to disparities and how they may accumulate in mid- and late-life. Dr. Zurlo’s research trajectory aims to gain a better understanding of how public policy interacts with life course processes to impact patterns of health and economic disparities in the US and internationally.
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