Another Day Older and Deeper in Debt Rising financial problems of householders 65 and older re you one of the helpers? Do you provide financial support to your adult children or aging parents? If you are between the ages of 40 and 64, chances are the answer is yes. Here’s how we know: When AARP asked a nationally representative sample of people aged 40 to 64 whether they had provided financial support for basic expenses to children aged 25 or older in the past 12 months, the majority (51 percent) said yes. Not only that, but a substantial 32 percent said they had provided financial support to their parents in the past year. The AARP survey was conducted in the fall of 2019.
debt, according to the Survey of Consumer Finances. Only 15 percent were still making mortgage payments. Times have changed. As of 2016 (the latest data available), 61 percent of householders aged 65 or older were in debt—33 percent had mortgages, 21 percent had car loans, and 35 percent carried a balance on their credit cards. There’s more bad news. The amount owed by older householders has grown by multiples. Among householders aged 65 or older with mortgage debt, for example, the median amount owed climbed from $17,000 to $72,000 between 1989 and 2016—a more than four-fold increase after adjusting for inflation.
The number of middle-aged Americans who are providing financial support to their adult children and/or elderly parents is likely even higher today. The coronavirus pandemic and consequent contraction of the economy has upended the finances of millions of Americans. Younger adults have been hit hard because they work disproportionately in industries most likely to have been shut down by the coronavirus—such as food service. But many older Americans are also at risk, in particular the growing share of people aged 65 or older who are still at work because of debt. Twenty percent of people aged 65 or older are in the labor force, according to the Bureau of Labor Statistics. Among 65-to69-year-olds, the figure is 34 percent. Many are still working because they need the money to pay mortgages, car loans, and credit card debt.
Older Americans with debt are the ones most likely to be in the labor force, according to an Employee Benefit Research Institute analysis. The deeper in debt, the more likely they are to work. “Highly leveraged households were more likely to work compared with those with lower debt-to-net-wealth ratios,” reports EBRI, an ominous finding at a time when the unemployment rate is projected to hit levels not seen since the Great Depression.
The ugly fact is, the great majority of older Americans are in debt. It didn’t used to be this way. A generation ago in 1989, just 38 percent of householders aged 65 or older had any
PERCENT OF HOUSEHOLDERS AGED 65 OR OLDER WITH DEBT, BY TYPE, 1989 AND 2016
6
The COVID-19 economy is trouble for the baby-boomers who need to make their mortgage, auto, and credit card payments. Many boomers “are scrambling to pay expenses or maintain debt payments as their income drops, altering their financial security now and changing their calculations for the future,” warns Kim Blanton of the Center for Retirement Research. The coronavirus recession is also trouble for the helpers— midlife adults who will see growing demands for financial support not only from their adult children but also from their elderly parents. 1989
2016
Any debt
37.8%
61.1%
Credit card
20%
35.1%
Primary residence
15.4%
33.4%
Auto loan
10.3%
21.2%
Other residential
2.7%
4.4%
Student loan
0.5%
2.4%
AMERICANDEMOGRAPHICS I MAY 2020
Source: Congressional Research Service, Household Debt among Older Americans, 1989–2016, September 11, 2019
