More Older Adults Carrying Debt In Retirement. Medical Costs to Blame.
By Rick Delaney, Chairman of the Board, TSCL
Retirees are carrying more debt than ever before, and high medical costs are often to blame. The COVID - 19 pandemic appears to have added to the financial stress of many older households. Recently, Susan Garland of The New York Times reported that on average, retirees had doubled their non-mortgage debt in 2020 — to $19,200. Driving this rising debt load are soaring medical costs, a steep decline in pensions, growing housing expenses, and low-interest rates earned by savings. Sound familiar?
Debt is a major obstacle for the financial security of many older adults. Unexpected costs, an unexpected hospitalization, or pricey new prescription drug can plunge older households into unmanageable debt. It’s hard to budget adequately for emergencies even when people are working, let alone when living on a fixed income. According to our most recent Senior Survey, 25% of participants said they had to postpone filling one or more prescriptions in 2020 due to high cost.
The sluggish growth in Social Security benefits also plays a role in growing debt. While the annual cost-of-living adjustment (COLA) raised an average Social Security benefit of $1,550 by a little more than $20 per month, only 14% percent of participants in our Senior Survey reported that monthly household expenses grew by $20 or less last year. Eighty-six percent reported that monthly expenses grew by more than $20 and, of that group — almost half, 40% of survey respondents, reported monthly expenses increased by more than $120 per month.
TSCL is working to get legislation enacted that would boost Social Security benefits, pay a fairer and higher COLA, and to adjust income thresholds that subject Social Security benefits to taxation so that more retirees can keep more of their benefits. The legislation would pay for the boost and provide greater solvency for the program by requiring higher earning workers to pay their fair share of payroll taxes.
If you are carrying debt, the National Council on Aging has a number of resources to help older households manage debt. Learn more at: www.NCOA.org.
Please help TSCL understand how COVID-19 has affected your financial security. Take our all NEW Retirement Survey and let us know! Your answers help us show Congress why legislation is needed to strengthen Social Security.
Sources:
“Rising Debt, Falling Income: How to Dig Out,” Susan B. Garland, The New York Times, April 17, 2021.
