The Growing Burden of Elder Debt
January 16, 2018 | by the National Care Planning Council
The stigma of debt is not as great for older individuals as it once was. As a result, the amount of per capita debt held by seniors is growing every year. The bulk of this debt is in the form of home equity mortgages and credit cards. Undoubtedly some of this debt is due to escalating medical costs, but it also may be due to other factors such as extremely dismal fixed interest returns on savings and investments where most seniors are invested. Here are some facts concerning senior debt.
The median level of debt among households led by someone 65 and older — the level at which 50% of older households are above and 50% are below — more than doubled between 2001 and 2013 to $40,900 according to the US Census Bureau .
These figures show American seniors have grown much more likely to be in debt — even as other groups have become less likely to have debt. People 65 and older were more likely, for example, to have a mortgage in 2011 compared to 2000, while people under 55 were less likely to have a mortgage — or any debt. For seniors, the typical level of "secured" debt — including mortgages — jumped from around $25,000 to $50,000.
Older households "are less likely to own their homes free and clear than was once the case," says Richard Fry, a researcher at the Pew Research Center. "Increased homeownership by seniors may explain some of the jump, but older Americans over the past decade also ramped up their use of home-equity loans, where consumers borrow against the equity in their homes," he states.
"It's not because more older Americans bought homes," says Bill Emmons, an economist with the St. Louis Fed. "Instead, they borrowed big against their houses. Some took out home equity loans, while others refinanced and took out cash, but also extended the term of their mortgages."
Money was easily available before the credit crisis in 2008 and it was cheap. Some senior citizens used the funds to make home repairs, pay for vacations or help their children, while others put the proceeds in the stock market, figuring they could make a lot more money.
Only 24% of homeowners over the age of 62 had mortgage debt in 1992, but that figure soared to 45% in 2010.
"Virtually everyone borrowed more because of availability and incentives," says Craig Copeland, senior research associate at the Employee Benefit Research Institute. "Surprisingly, older people got the bug more than everyone else."
Census researchers also found that only 69% of U.S. households had any debt in 2011, compared with 74% in 2000. On the other hand, older folks increased their debt load.
Growing debt contributes to the inability to pay for food, rent, insurance and medical care in later life. Money that could be used towards these basic maintenance costs must be used instead to pay down the debt load. Debt is becoming a major impediment to aging seniors and their ability to cope with or even enjoy the final years of life.
