Households increasingly led by older Americans who are retired or approaching retirement are saddled with higher levels of debt. This has significant implications for the nation’s retirement readiness, according to an issues brief released last week Employee Benefit Research Institute (EBRI).
“While improvements have been made in many areas in recent years, the overall trend in debt when it comes to retirement readiness is troubling, as American households in or out of retirement are more likely to be in debt and have higher levels of debt than in past generations. people, especially those approaching retirement in the 1990s,” the brief states.
EBRI explains that one of the biggest culprits is credit card debt. The overall share of households headed by someone 75 or older with credit card debt has reached its highest level since the early 1990s. This keeps financial concerns top of mind throughout retirement, as the likelihood of these individuals living on a fixed income remains high.
“It therefore appears that households with a head of household during their working years need help managing debt, which could be achieved through employer-provided financial benefits packages that can help improve money management,” the briefing notes.
This move will help these families properly manage their debt in retirement, improve their overall financial health, and allow more older Americans to focus on work or feel more secure in retirement.
“This is more important for non-white-headed households because they have more debt (especially credit card debt) relative to assets than non-Hispanic white-headed households,” EBRI explains.
The purpose of this briefing is to focus on an element of retirement saving that is not as frequently discussed as the accumulation phase of saving: the impact of debt on the ability to maintain retirement. This data is from 2022 United States Federal Reserve Survey of Consumer Finances, latest data available.
