Boomers in Debt: Why Credit Card Debt Is Hitting Retirees Harder Than Expected

You may be quite familiar with the plight of debt amongst the working class, but what about those who have stopped working ?

It would seem that once you retire, it is because your financial situation, not necessarily age, has indicated it was time to do so. However, whatever lump sum you have stashed away in your retirement account may not be enough to keep you from getting over your head in personal loans, mortgage debt or paying off your credit card.

Learn More: Cutting Expenses for Retirement? Here’s the No. 1 Thing To Get Rid of First

Consider This: 4 Things You Must Do When Your Retirement Savings Reach $50,000

Baby boomers, who came of age in a post-war economy and saw the growth of the middle class, may have expected that their golden years would be secure, or at least debt-free. Yet, a growing number of retirees today are grappling with significant financial burdens such as loan balances, mortgage payments or credit card payments.

Unlike previous generations, boomers are carrying higher debt into their retirement, leading to financial stress and poor credit scores in what was supposed to be a more carefree time of life.

In this article, GOBankingRates reveals why credit card debt is hitting retired boomers harder than expect — and what they can do about it .

It's Going Viral: Want to Retire Rich? Suze Orman Says You're Missing This Key Money Move

Quick Take: Credit Card Debt in Retirement

There are many forms of debt payments you’ll have to make throughout your lifetime, but once you reach retirement age, the amount you owe should go down not up.

Unfortunately, this is not the case for many people over the age of 65. Here are some key takeaways from the federal government’s most recent Survey of Consumer Finances (SCF) :

• The SCF found that among all groups younger than 65, debt was estimated to double from 1992 to 2022 in correlation with inflation.
• In that same period, debt more than quadrupled in households headed by people aged 65 to 74. This means it went up in average from approximately $10,150 to $45,000 per household.
• People 75 and up saw debt increase almost sevenfold which means it went up from $5,000 to about $36,000.
• Housing costs are the biggest threat to many seniors’ retirement accounts as almost 40% of people 80 and up pay at least 30% of their income on either rent or mortgage monthly payments.

Read Next: 2 Things Empty Nesters Should Stop Investing In To Boost Retirement Savings

Boomers vs. Credit Card Debt: Biggest Contributing Factors

Managing debt in retirement is difficult, mainly because your financial situation always seems to be on a shaky foundation.

Credit card debt amongst retirees has skyrocketed for many reasons, and though it varies by each person’s unique financial situation, here are some main causes for retirement debt spirals.

Why Boomers Don’t Have Enough Retirement Savings

Many boomers entered their retirement years with inadequate savings. For those with savings, the median retirement account balance is far less than what is needed to maintain their pre-retirement lifestyle.

With pensions becoming rarer and Social Security payments often insufficient to cover monthly expenses, many retirees turn to credit cards as a financial stopgap.

GOBankingRates recently conducted a study to determine the minimum amount you would need in retirement savings in every state. The following statistics are for those planning to retire in Florida to give you some perspective of just how easy it would be to go into debt:

• Required retirement savings: GOBankingRates estimated you need $736,588 for 20 years, $920,736 for 25 years and $1,105,989 for 30 years of retirement in Florida.
• Cost of living: For retirement in Florida, the average annual cost of living is around $58,396, which drops to $36,829 once you factor in Social Security benefits.
• Healthcare costs: One of the largest and most unpredictable expenses for retirees is healthcare. While Medicare helps cover some costs, it does not always provide full coverage for expensive prescriptions, specialized treatments or long-term care. In Florida, GOBankingRates found the average annual cost to be $7,321.34.
• Grocery bills: Retirees living on fixed incomes often find that their purchasing power has diminished significantly, especially when it comes to necessities such as food. It’s estimated that Florida residents pay about $4,782.61 annually for groceries.
• Housing costs: In the current economic climate, inflation has caused the prices of everyday goods and services to skyrocket. Nowhere is that more clear than with the housing market as GOBankingRates found housing costs to be about $12,557 annually.
• Utility bills: Electric, water and gas utilities are all more expensive than they were a decade ago, leaving retirees with fewer options but to use credit cards to make ends meet. Floridians pay about $4,189 a year in utility bills.
• Transportation: Florida isn’t always a pedestrian-friendly state so having a car is more a necessity than a luxury. You can expect to pay about $4,805 a year there in retirement on transportation.

Final Take To GO: Handling Debt in Retirement

The bottom line is that boomers continue to retire in large numbers, the issue of credit card debt among retirees will likely remain a pressing concern.

Essentially when prices increase, it is easier to handle when you are in the workforce as wages tend to increase, but retirees can only dip into their savings or accrued housing equity.

If you do find yourself in credit card debt in retirement, there are ways you can still work your way out of it. Here are some options for boomers facing the challenges of credit card debt, plus ways to regain financial control:

• Debt consolidation : Retirees with multiple credit cards can benefit from consolidating their debt into a single loan with a lower interest rate. This simplifies payments and can reduce overall interest costs.
• Credit counseling : Nonprofit credit counseling agencies offer free or low-cost services that help retirees create a budget and negotiate with creditors to lower interest rates or set up manageable repayment plans.
• Downsizing : Selling a larger home and moving into a more affordable living situation can free up cash to pay down debt and reduce monthly expenses.
• Spending adjustments : Tracking expenses and creating a budget tailored to fixed income can help retirees cut unnecessary costs and focus on paying off debt.

This article originally appeared on GOBankingRates.com : Boomers in Debt: Why Credit Card Debt Is Hitting Retirees Harder Than Expected