Debt Delinquency Among Older Americans: A Growing Challenge for Retirement Security

Mingli Zhong is Senior Research Associate at the Urban Institute and visiting scholar at the Wharton School of the University of Pennsylvania. All opinions are her own. Her LinkedIn account is https://www.linkedin.com/in/mingli-zhong-phd-42051222/

Many older Americans are financially vulnerable due to debt delinquency that casts a shadow over their retirement preparedness. Our recent study analyzes debt burdens among over 4 million Americans age 50+ using credit bureau records from August 2022, illuminating notable disparities by race, ethnicity, and age. Increasingly, older adults are carrying debt into retirement, so understanding these challenges becomes crucial for their financial wellbeing in later life.

Why is debt delinquency a concern for retirees?

Carrying debt into retirement is not a new phenomenon, but its scope and impact have grown dramatically in recent years. Our analysis reveals the following facts:

About one-fifth (21%) of older Americans we studied had delinquent debt, meaning  their loan repayments were more than 60 days overdue. Among adults age 50–61, the rate was even higher at 28%, versus 16% for those age 62+. This pattern suggests that many pre-retirees must juggle the costs of supporting dependents, paying down their mortgages, or managing medical expenses. This can put them in a precarious financial condition as they move into retirement.

Having delinquent debt can force some older adults to prioritize loan repayments rather than covering essential expenses for healthcare, housing, and even daily living costs. Such financial juggling compromises their ability to save for retirement and build a cushion for unexpected expenses, leaving them financially vulnerable as they age.

For many older Americans, medical debt is a critical issue. Some 13.2% of adults age 50–61, and 6.9% of those age 62+, hold medical debt that has been sent to collections agencies. Student loans, while often thought of as younger persons’ burdens, also weigh heavily on older adults. Among Asian American and Pacific Islander (AAPI)-majority areas, median delinquent student loan balances are particularly high, reaching over $21,000.

How do debt burdens differ by race and ethnicity?

Our research also documents stark racial and ethnic disparities in debt burdens. which can compound inequality in financial wellness:

Residents of American Indian/Alaska Native (AIAN)-majority areas have the highest debt delinquency rates at 44%, followed closely by residents of Black-majority areas (43%) and Hispanic-majority areas (31%). By contrast, majority-White areas report significantly lower rates.

More than 40% of residents in AIAN- and Black-majority areas have debt in collections, compared to 17% of residents in white-majority areas. Medical debt and student loans are particularly significant contributors to these disparities.

Though debt in collection rates in AAPI-majority areas are low (11%), those who do carry debt in collections have some of the highest loan balances relative to their resources ($1,670 in median debt in collections, compared to $1,542 for Black-majority areas and $1,615 for Hispanic-majority areas).

Why are older Americans struggling with debt?

Several broader economic and policy trends contribute to the rising prevalence of debt among older adults:

  • Shifts in Retirement Financing:
    As traditional pensions have declined, giving way to defined contribution retirement savings plans like 401(k)s, many older workers are entering retirement with insufficient lifetime income. In turn, this leaves them more reliant on debt to cover living expenses.
  • Rising Costs of Healthcare and Education:
    Medical debt remains a persistent issue, particularly for those without comprehensive insurance coverage. Additionally, older Americans increasingly carry student loans, either their own or those taken to support their children’s education.
  • Geographic Disparities:
    Local economic conditions also play a role. Communities with high concentrations of poverty or limited access to high-quality jobs often see higher rates of delinquent debt, further exacerbating financial vulnerabilities.

Taken together, these findings highlight a critical gap in retirement readiness for many communities of color, driven by historical inequities, systemic barriers to wealth accumulation, and limited access to affordable credit.

What can policymakers do?

Addressing debt delinquency and improving retirement security in the older population will require targeted policy interventions. Policies that decisionmakers might consider include:

  • Encourage Savings and Debt Reduction:
    Financial literacy programs tailored to older adults can help them manage debt and prioritize savings. Expanding employer-sponsored financial education could also help pre-retirees prepare more effectively for retirement.
  • Expand Access to Affordable Credit:
    Reducing reliance on predatory lending in communities of color is essential. Policymakers could explore credit programs that offer fair terms and provide opportunities for debt consolidation at lower interest rates.
  • Strengthen Social Safety Nets:
    Enhancements to Medicare and Medicaid could reduce the burden of medical debt, while income support programs could help retirees meet their basic needs without resorting to high-cost credit.
  • Promote Inclusive Retirement Policies:
    Policies that support automatic enrollment in retirement plans, increase employer contributions, and provide incentives for low-income workers to save could reduce reliance on debt in later life.

Final thoughts

As older Americans are carrying more debt into retirement, addressing the root causes of debt delinquency will be needed. Our evidence on racial and ethnic disparities in debt burdens underscores the importance of policies to support more equitable retirement outcomes.

Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.

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