A recent report by the Government Accountability Office finds that, over the last decade, the amount of debt held by older Americans has grown significantly and could ultimately derail an otherwise well-planned retirement.
According to GAO’s “Retirement Security: Debt Increased for Older Americans over Time, but the Implications Vary by Debt Type,” the share of older households with debt—and both the median amount and stress of that debt—were significantly higher in 2016 than they were in 1989.
Based on an analysis of Survey of Consumer Finances (SCF) data, the GAO found that the median debt amount for older households with debt was about three times higher in 2016 ($55,300) than in 1989 ($18,900 in real 2016 dollars) and the share of older households with home, credit card, and student loan debt was significantly higher in 2016 than in 1989.
The GAO was asked by Sen. Robert Casey, Jr. (D-PA), Chairman of the Special Committee on Aging, and the Committee’s ranking Republican, Sen. Tim Scott (R-SC), to examine trends in debt held by older Americans and the implications for retirement security. This report follows a 2019 report by GAO which estimated that 20% of older American households aged 55 or older had less than $22,000 in income in 2016, and in a 2015 report that about 29% of older households had neither retirement savings accounts (such as a 401(k) plan) nor a defined benefit plan in 2013.
While the GAO typically offers a set of policy recommendations to address its respective study topic, this report does not provide any.
Debt Outcomes
Overall, GAO found that trends in debt, debt stress and adverse debt outcomes varied by older Americans’ demographic and economic characteristics, including their age, credit score and state of residence. But when breaking down these trends for older Americans in different demographic and economic groups, the GAO found that some groups appear particularly vulnerable.
For example, higher shares of households aged 60 or older had home debt and credit card debt in 2016 than in 1989, the report notes. Moreover, from 2003 to 2019, individuals aged 75-79 often had higher shares of credit card and student loan debt that was delinquent than those aged 50 to 74.
The GAO further notes that, over this same period, older individuals with credit scores below 720—including those with subprime, fair or good credit—had median student loan debt amounts that were more than twice as high in 2019 as in 2003.
Low-Income Debt Stress
Additionally, while older Americans’ overall debt and debt stress generally decreases as they age, those in low-income households experienced greater debt stress, the GAO further reports.
For example, a larger percent of low-wealth households held non-housing debt (including credit card balances, medical debts and life insurance policy loans), which may be unsecured or have a variable interest rate, and this gap persisted as they aged. These low-income and low-wealth households may be less likely to have a secure retirement due to their debt, the report observes.
Further, GAO’s analysis of data from the SCF found that in 2016, debt stress levels were about two times higher for Black, Hispanic and other multiple-race households than for White households.
Health Shocks
As part of its analysis, the GAO also interviewed various experts, who noted that health shocks or unpredictable illnesses could leave those with debt particularly vulnerable. In this instance, the negative impacts on retirement security can be compounding for the surviving spouse, particularly if they have spent down their assets and have more debt than before the health shock. Moreover, the negative consequences of a spouse’s death are more likely to fall on women, as women tend to live longer than men, the report emphasizes.
The experts further noted that it is too early to evaluate the retirement security implications caused by the COVID-19 pandemic, in part because the CARES Act provisions suspended certain debt payments. The GAO notes, however, that as with past recessions, the pandemic may further reveal economic fragility among older Americans who, for example, lost jobs or cannot work.
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