Why older Americans are taking on more debt

Older Americans are accumulating more debt as they near retirement, according to recent research that reveals a troubling trend in personal finance among people in their 50s and early 60s.

Two senior citizens look at a calculator while seated at a table covered in paperwork.

Just when they should be reaching the peak of their retirement savings, this group is still paying off mortgages and grappling with credit card debt, medical bills, and student loans. The burden is leaving them stressed, harassed by bill collectors, and worried about their financial future as the clock ticks down on their income-earning years.

“This is a very different world in terms of debt than our parents and grandparents lived in,” says Olivia S. Mitchell, a Wharton professor of business economics and public policy who co-authored the working paper, “Understanding Debt in the Older Population,” published by the National Bureau of Economic Research.

The survey-based study expands work that Mitchell did more than a decade ago following the Great Recession that found the median debt for baby boomers had quintupled. Now, the Generation Xers right behind them aren’t faring much better. They report being saddled with debt from a variety of sources, including caring for still-dependent children under the age of 18, paying off student loans for themselves or as co-signers, and digging out from under medical bills not covered by health insurance. The skyrocketing cost of housing is adding to the stress.

“Instead of going with the old way of the mortgage-burning party, which is what people did when they paid off [their mortgage] prior to retirement,” Mitchell says, “nowadays we see people buying bigger, more expensive houses with less down payment and therefore carrying bigger mortgages into retirement, which can put them in very tight straits if they’re not very careful.”

Read more at Knowledge@Wharton.