The Alarming Rise of Credit Card Debt in Retirement
A growing number of Americans are entering retirement with significant credit card debt, a trend that experts warn could have severe consequences for their financial well-being. According to a recent survey by the Employee Benefit Research Institute, a staggering 68% of retirees had outstanding credit card debt in 2024, up from 40% in 2022 and 43% in 2020.
The True Driver: Inflation
Researchers point to inflation as the primary cause of this increase. As prices rise, retirees are forced to rely on credit cards to cover essential expenses, leading to a cycle of debt. Bridget Bearden, a research strategist at EBRI, notes that “if so much of your Social Security income is now going toward your rent, then you have few funds left over for other essential expenses.”
The Expensive Form of Borrowing
Credit cards, which carry high interest rates, are an expensive way to borrow money. With interest rates reaching record highs, consumers are paying a hefty price for their debt. The average household with credit card debt pays $106 a month in interest alone, according to the Federal Reserve Bank of St. Louis.
Rising Debt Levels
Rising debt levels are a problem that affects not only retirees but also working Americans. According to a separate EBRI study, American families are increasingly struggling with debt during their working years, which then carries into and through retirement.
Breaking the Cycle of Debt
Financial advisors recommend that retirees take a close look at their spending habits and identify areas where they can cut back. They should also consider lifestyle changes, such as relocating to an area with a lower cost of living, to reduce expenses. Additionally, retirees can explore options such as selling valuable items, contacting a nonprofit credit counseling agency, or transferring their balance to a card with a 0% interest-rate promotion.
Seeking Professional Help
In some cases, retirees may need to seek professional help to get their debt under control. A financial advisor can help them analyze their situation and develop a plan to pay off their debt. They can also explore options such as using a home equity line of credit (HELOC) or withdrawing from a retirement account to pay off their debt.
Taking Control of Your Finances
The rise of credit card debt in retirement is a worrisome trend, but it’s not inevitable. By taking control of their finances, identifying areas for cost-cutting, and seeking professional help when needed, retirees can break the cycle of debt and enjoy a more secure financial future.
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