AARP: Surging Senior Debt Threatens Retirement Security

Total debt among the American population has nearly doubled since 1999, threatening the retirement security of millions of Americans, exacerbated by stagnant wages and rising costs of living. This is according to a new blog post by AARP highlighting the headwinds seniors face in retirement.

“American families have been accumulating debt at a rapid pace over the past two decades, with the debt level nearly doubling,” the post reads. “Yet family incomes have not kept pace. As a result, the long-term retirement security of many families is at risk. AARP surveyed working families in April 2021 and found that the two main barriers to people saving more for retirement are the lack of money (55%) and debt payments (44 %).”

While debt can be good or bad and can decrease over time, for many American seniors debt has instead been growing over time, the post explains.

“For older families who face this problem [of rising debt], many of whom have entered their retirement years, the consequences can be even greater,” the post reads. “When this occurs, it can be difficult to keep up with monthly payments. And the debt is not just mortgages and home equity lines of credit; it is credit cards, auto loans, and increasingly, student loans.”

Seniors may have difficulty continuing to meet their forward mortgage obligations on a fixed income in retirement. According to AARP data, the largest share of debt is attributable to mortgages.

“Mortgages and home equity lines of credit account for 72% of the outstanding debt,” the post reads. “Student loans make up 10% while auto loans and leases account for 9%. Credit cards account for 5% and other loans, such as sales financing, personal loans, and store credit cards, make up the rest.”

The debt of younger cohorts has a smaller share of total debt attributable to mortgage or home equity credit lines, but the dominance of this debt among every tracked cohort from ages 18-70 and above is apparent in the data, according to data from the New York Fed Consumer Credit Panel in Q4, 2021.

“Americans age 50+ owe $7 trillion, or 45 percent of the total consumer debt outstanding. Today, more families headed by someone age 50+ are carrying debt than ever before,” the post explains. “Data from the Federal Reserve Survey of Consumer Finances (SCF) show that in 1998 nearly 60% of families age 50+ carried debt; by 2019, the percentage increased to 71.6%.”

AARP Article from Chris Clow, Reverse Mortgage Daily.

Commentary from Shawna McDonald, Loan Officer, Grass Valley’s ONLY Reverse Mortgage Specialist: “ I recently met with 2 new clients who decided to pay off their existing conventional loans with a reverse mortgage loan and thereby eliminate their money mortgage payment, and, each of them had money left over from that process to go into a reverse mortgage credit line. Part of the credit line loan proceeds would be used to pay off credit card debt that is at a much higher interest rate than the interest rate on the reverse mortgage credit line which made financial sense to these clients.

Call today to explore with Shawna how you too could be retiring your current loan and/or setting up a reverse mortgage credit line loan.

===Grass Valley Local! Shawna McDonald, Reverse Mortgage Loan Officer, 13 year specialization solely in reverse mortgage loans, successfully having completed hundreds of them. Representing 11 of the largest reverse mortgage lenders; get great rates & local, personalized service in person, in Grass Valley, from loan start to finish. Visit my website Available by confirmed appointment in my downtown Grass Valley office or by phone (530) 497-3010 NMLS #271335 | CalDRE #00585530 Zying Mortgage Inc. Company NMLS 76801 |Company CalDRE # 014461===