Elderly debt is Rising, and Fast

By: Jake Willms, Quantitative Analyst

New research released by the Employee Benefit Research Institute brings a clear warning to pay attention to your spending. The number of people age 75 and older who “lead a household and carry debt” has spiked to over 50% in 2019, which is up significantly from the 31.2% mark in 2007. The 65 to 74 range is also up in 2019, rising from 65.2% to 70% in the same span. The study also mentions that median credit card usage is trending up as well, adding to the number of worrying statistics.

It’s no question that the economic downturn sprung on by COVID-19 has influenced these numbers. But as the chart below shows, this trend started pre-pandemic, so the root cause isn’t so easily blamed this year’s pandemic.

In fact, most of the uptick is found in the 2007 – 2016 range. Despite this, I still believe COVID-19 has played a significant role in rising debt. The combination of social distancing orders, mandatory small business shutdowns, and mass layoffs across the country has sent many Americans searching for financial relief, even the elderly. Beyond the $1200 stimulus checks from earlier this year, the only other option for many people is using up their savings account. Unfortunately for the elderly, this premature use of savings can be far more costly, as they don’t have the same time or access to work that is needed to get themselves out of debt and back on track.

Investors should be placing a large emphasis on building up a retirement account and saving for your golden years, of course, but statistics like these are a friendly reminder to pay attention to your short-term spending and expenses as well, so you don’t end up in a hole that you cannot climb out of. Avoiding credit card debt as best as possible and maintaining a healthy emergency funds are important pillars of proper budgeting that every investor, no matter how old, needs to pay attention to.

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