Not Just Millennials: Older Working Americans Struggle with Debt

More feel compelled to work past normal retirement age

By Stephen Miller, CEBS Feb 3, 2015

A larger share of older American workers and their families have debt loads that are considered problematic, according to a January 2015 report from the nonprofit Employee Benefit Research Institute (EBRI).

Among families headed by Americans ages 55 or older, the percentage with debt payments greater than 40 percent of income—a traditional threshold measure of debt load trouble—increased to 9.2 percent in 2013, up from 8.5 percent in 2010.

In addition, the percentage of families with at least some debt increased from 2010 to 2013 for each age group studied:

For those families with heads ages 55–64, the percentage with debt increased from 77.6 percent in 2010 to 78.5 percent in 2013.

Among those families with heads ages 65–74, the percentage with debt increased from 65.0 percent to 66.4 percent.

For those families with heads ages 75 or older, the increase was from 38.5 percent to 41.3 percent.

Ready to Retire, or Not

“These debt results are troubling as far as retirement preparedness is concerned, in that the data indicate that American families just reaching retirement or those newly retired are more likely to have debt—and higher levels of debt—than past generations,” noted Craig Copeland, EBRI senior research associate, in the report.

The primary cause of rising debt load: Americans’ homes.

“Housing debt was the major component of debt for families headed by individuals ages 55 or older,” explained Copeland. “The debt levels among those with housing debt have obvious and serious implications for the future retirement security of these Americans, perhaps most significantly that these families are potentially at risk of losing what is typically their most important asset—their home.” Moreover, “the amount of debt backed by primary residences among these families could lead to either a forced sale or limited ability to use any housing equity for funding retirement.”

The full report, Debt of the Elderly and Near Elderly, 1992–2013, was published in the January 2015 EBRI Notes.

Countering Financial Distress

EBRI’s findings indicate that more workers may feel compelled to stay on the job past their normal retirement age—if their health allows them to do so. Financially, they may feel they have no other choice. High levels of debt-related stress have also been shown to lower productivity. For instance, according to the Society for Human Resource Management’s 2014 Employee Financial Stress Survey, almost two-fifths of HR professionals said that employees have missed work in the past 12 months because of a financial emergency.

“Anxiety related to finances could be an increasing source of employee stress that has a direct impact on health care costs, absence and productivity,” said Evren Esen, director of SHRM's survey programs. “As a result, money management strategies—including budgeting and investing—may increasingly be considered as a part of workplace stress management and wellness initiatives.”

SHRM’s survey showed that retirement planning (81 percent of organizations) and financial literacy training (42 percent) were the most common types of financial education services offered to employees through their worksite.

Stephen Miller, CEBS, is an online editor/manager for SHRM. 

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