More and more households headed by an individual aged 55 or older are in debt, current research results from the Employee Benefits Research Institute (EBRI).
In 1992, 53.8% of older households were in debt. But from 1998 to 2019, this percentage rose steadily before declining barely from 2019 to 2022, the newest 12 months for which data can be found.
In 2022, 66.8% of older households had debt.
Overall, the older the pinnacle of the household, the lower the likelihood of household debt.
In 2022, 77.2% of families where the pinnacle of the family was aged 55-64 had debt. This proportion fell to 64.8% when the pinnacle of the family was aged 65-74 and to 53.4% ​​when the pinnacle of the family was 75 years or older.
But even these numbers have increased in comparison with previous years. For example, of households headed by a householder aged 75 or older, 41.3% had debt in 2013, in comparison with 53.4% ​​in 2022.
The query is whether or not this trend is a foul thing. In the past, people were encouraged to pay down debt before retirement or as early in retirement as possible.
But some financial advisors have modified this recommendation in recent a long time.
Many homeowners had taken out low-interest mortgages, and the stock market was in a bull market punctuated by periodic declines. It might make sense to remain invested in stocks moderately than use the cash to repay a low-interest mortgage.
In addition, the EBRI stated that the typical debt level in 2022 will likely be concerning the same as in 2010. Other metrics of household financial security, similar to the debt-to-asset ratio and the share of income spent on debt repayment, have also improved for older Americans in recent times.
The bottom line is that having debt in retirement just isn’t necessarily a foul thing.
A family must consider the kind of debt (fixed or variable rate of interest), alternative uses of the money, the quantity of total debt, and the reliability of income and money flow.
It’s also necessary to think about non-financial aspects. Some people feel more comfortable in retirement being debt-free, while others aren’t concerned about having a manageable level of debt.
The right answer for one household will not be the correct answer for its neighbors.
