As prices for virtually everything soared over the past year, many older households are struggling to stay afloat. TSCL’s online survey, conducted from January through March of 2022, reveals that half of all survey respondents say they have spent through emergency savings or have no savings at all. Consequently, older households are carrying more debt on consumer credit cards, with potentially debilitating financial consequences.
Forty-three percent of TSCL survey participants say they have carried debt on consumer credit cards for more than 90 days, and another 7% say they refinanced a home mortgage over the past 12 months. Our survey did not measure those who have auto loans, or who are paying down student loan debt, often for grandchildren or other family members.
But for those who carry credit card debt, dealing with it in 2022 is about to become much more costly. The Federal Reserve is raising short-term interest rates for the first time since December of 2018. While estimates vary, those rate hikes could drive average rates on a credit card up from 16.13% to as much as 17.5% by year-end. Most credit card rates are variable and will edge up each time the Fed acts.
TSCL has received hundreds of emails from many who say that rising food and prescription drug costs have caused them to cut back to one meal a day. Housing is also a source of major anxiety as landlords impose higher than expected rental increases, or even two rental increases in the same year. Some of you have described postponing necessary home repairs, and a few of you have described the trauma of losing a home or apartment.
Carrying debt in retirement was a rapidly growing trend even before the COVID pandemic. According to a report by the Congressional Research Service, the percentage of older households carrying debt increased from 37.8% in 1989, to 61.1% in 2016. During the same time, the median (mid-level) amount of debt among older households increased from $7,463 to $31,050 (in 2016 dollars). Our modern-day reliance on credit or debit cards instead of checks has no doubt contributed to growing consumer debt trends.
Now, rising interest rates could make it even more difficult for some retirees to deal with inflation in 2022. If you are having trouble paying off accumulating credit card debt, the National Council on Aging may be able to help. Their online AgeWell Planner can help you assess your needs and learn about financial assistance that can help you lower some costs, boost some savings, and may help trim your debt.
Tell us how rising costs are affecting you, and which legislative proposals you think could help. Many of you tell us you feel ignored and left behind by Congress. Please help us put together the legislative priorities that matter most to you and reset the agenda for Congress! Take our new survey: https://seniorsleague.org/2022-senior-priority-plan/
Sources: “High Inflation Triggers Trauma For Those With Credit Card, Student Debt,” Susan Tompor, Detroit Free Press, February 11, 2022.