Older Americans tend to carry less debt than their younger counterparts, but the current coronavirus crisis may change that.
About 80% of seniors have some type of debt, including from credit cards, medical expenses or a mortgage according to a Senior Consumer Debt report from Senior Living. Most of the debt is found in credit cards, followed by mortgages, auto loans and medical (the latter being less likely because respondents were 65 and qualified for Medicare). Senior Living used a survey it conducted of 600 adults 65 and older as well as data from the National Council on Aging.
About a third of people 65 and older said the pandemic has already changed their finances. Half of seniors said they do not expect the pandemic to increase their debt, while 12% so far said they will need to take on more debt as a result. A quarter of respondents said they were not sure what their debt status will be as a result of the crisis.
More than a third of seniors said they carry a balance on their credit cards, according to the survey. The average amount in credit card debt alone is $4,400 for an older American, compared to $6,200 for people across all age groups, though 20% of seniors said they had balances exceeding $10,000. Approximately 36% of respondents said they do not pay their balances in full each month.
COVID-19 has the potential to upend many individuals’ retirement plans. Unemployment claims have reached record levels in the last two months, and some people are trying to make ends meet — let alone save for their futures. Workers have had to halt their retirement contributions, employers are cutting back on company matches and people overall are focusing on overcoming present-day challenges.
The government has made it easier for Americans to tap into their retirement savings, by eliminating penalty fees and increasing distribution amounts from 401(k) plans and individual retirement plans, but financial advisers urge savers to use that option as a last resort. Everyone will feel the effects of the crisis on their retirements, from low-income workers to high-income workers, according to the New School’s Schwartz Center for Economic Policy and Analysis.
Significantly more older Americans will end up in “de facto” poverty, according to an analysis from The New School’s Retirement Equity Lab. Researchers at the Retirement Equity Lab use “de facto” poverty levels because it is about twice as much as the federal level (at $12,760), and provides a better figure of “economic deprivation.” Approximately 15 million people 62 and older were living in this rate of poverty at the start of 2020, but that figure is expected to grow 67% to 25 million over the next decade, its analysis found.