Give Today's Retirees a 'D' - for Debt

What's quickly eating up a growing share of retirees' money these days? Not health care, as you might expect, according to a new report by the National Center for Policy Analysis.

Over the past 20 years, a greater percentage of older Americans' dollars has gone to servicing debt, particularly mortgage and home equity loans, the "free market" think tank says.

It used government data to compare the spending habits of today's retirees with those of their predecessors, finding, for instance, that 20 years ago most workers entered retirement free of debt.

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How things have changed.

Back in 1989, only about one in five consumers ages 65 to 74 had a mortgage or home equity loan, the report says. In 2010, more than a third did. The increase was even greater among those 75 and older: from 6 percent in 1989 to 21 percent in 2010.

Credit card debt held by older Americans has also risen significantly. Twenty-five years ago, for instance, plastic debt was so low among those 75 and older that it couldn't be measured. By 2010, the average credit card debt for this age group had jumped to $4,600, the report says. Over that period, the average credit card debt for people 65 to 74 climbed from $2,100 to $6,000.

The rise of debt also was documented in a study released last year on the finances of the middle class by the AARP Public Policy Institute.

Elizabeth R. Costle, PPI's director of consumer and state affairs, says that mortgage debt makes retirement less stable for older Americans. "It's a big part of their expenditures," she says. "It puts them in a more vulnerable position."

And even as home values rise, Costle says, older consumers don't get much further ahead because their debt is rising, too.

Photo: EduardoLuzzatti/iStockphoto

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