{"id":7732,"date":"2024-11-12T04:09:29","date_gmt":"2024-11-12T04:09:29","guid":{"rendered":"https:\/\/finderica.com\/credit-card-debt-among-retirees-jumps-significantly\/"},"modified":"2024-11-12T04:09:29","modified_gmt":"2024-11-12T04:09:29","slug":"credit-card-debt-among-retirees-jumps-significantly","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=7732","title":{"rendered":"Credit card debt among retirees jumps significantly"},"content":{"rendered":"
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Mixetto | E+ | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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The share of Americans with credit card debt in retirement has jumped considerably \u2014 a worrisome financial trend, especially for those with little wiggle room in their budgets, experts said.<\/p>\n

About 68% of retirees had outstanding credit card debt in 2024, up “substantially” from 40% in 2022 and 43% in 2020, according to a new poll by the Employee Benefit Research Institute<\/a>.<\/p>\n

“It’s alarming for retirees living on a fixed income,” said Bridget Bearden, a research strategist at EBRI who analyzed the survey data.<\/p>\n<\/div>\n

<\/a>Inflation is the ‘true driver’<\/h2>\n
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Inflation is the “true driver” of retirees’ increased use of credit cards, Bearden said.<\/p>\n

But it’s not just retirees.<\/p>\n

About 2 in 5 cardholders have maxed out or nearly hit their card limit since early 2022, resulting from inflation and higher interest rates, according to a recent Bankrate poll.<\/p>\n

U.S. consumer prices grew quickly in recent years, as they have around the world due largely to pandemic-era supply-and-demand shocks.<\/p>\n<\/div>\n

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More from FA Playbook:<\/h2>\n
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Here’s a look at other stories impacting the financial advisor business.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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“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,” thereby driving up credit card use, Bearden said.<\/p>\n

Social Security beneficiaries get an annual cost of living adjustment meant to help recipients keep up with inflation. However, data suggests those adjustments don’t go far enough. To that point, Social Security recipients have lost<\/a> about 20% of their buying power since 2010, according to the Senior Citizens League.<\/p>\n

EBRI polled 3,661 retirees between the ages of 62 and 75 during summer 2024. About 83% were collecting Social Security benefits, with the typical person getting roughly half their income from Social Security.<\/p>\n<\/div>\n

<\/a>An ‘expensive form of borrowing’<\/h2>\n
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Credits cards, which carry high interest rates, are an “expensive form of borrowing,” Federal Reserve Bank of St. Louis researchers wrote in a May 2024 analysis<\/a>.<\/p>\n

Credit cards have only become more expensive as interest rates have swelled to record highs.<\/p>\n

Consumers paid a 23% average rate on their balances in August 2024, up from about 17% in 2019, according to Federal Reserve data<\/a>.<\/p>\n<\/div>\n

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Rates have risen as the U.S. Federal Reserve hiked interest rates to combat high inflation.<\/p>\n

The average household with credit card debt was paying $106 a month in interest alone in November 2023, according to the Federal Reserve Bank of St. Louis.<\/p>\n<\/div>\n

<\/a>Retirees’ debt was rising before the pandemic<\/h2>\n
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Rising debt levels were a problem for older Americans even before pandemic-era inflation.<\/p>\n

“American families just reaching retirement or those newly retired are more likely to have debt \u2014 and higher levels of debt \u2014 than past generations,” according to a separate EBRI study<\/a>, published in August.<\/p>\n

More and more families are having issues with debt during their working years, which then carries into and through retirement, the report said.<\/p>\n

The typical family with a head of household age 75 and older had $1,700 of credit card debt in 2022, EBRI said in the August report. Those with a head of household age 65 to 74 had $3,500 of credit card debt, it said.<\/p>\n<\/div>\n

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Fstop123 | E+ | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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1. Reduce expenses<\/h3>\n

There are a few ways retirees can get their credit card debt under control, financial advisors said.<\/p>\n

The first step “is to figure out why they had to go in debt in the first place,” said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners in Jacksonville, Florida. She’s also a member of CNBC’s Financial Advisor Council.<\/p>\n

If a cardholder’s income isn’t enough to meet their basic spending, or if a big event such as a home repair or medical procedure required them to borrow money, the person should consider lifestyle changes to reduce future expenses, McClanahan said.<\/p>\n<\/div>\n

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McClanahan made these recommendations for ways cardholders can cut spending:<\/p>\n