A recent report from the Government Accountability Office found that older Americans’ debt has increased significantly over the past decade and could ultimately undo an otherwise well-planned retirement.

According to GAOs “Retirement planning: Older Americans have increased debt over time, but the effects vary depending on the type of debt“The proportion of older households with debt – and both the median amount and the burden of that debt – was significantly higher in 2016 than in 1989.

Based on an analysis of the Survey of Consumer Finances (SCF) data, GAO found that the median debt of older households with debt was about three times higher in 2016 ($ 55,300) than it was in 1989 ($ 18,900 in real 2016- Dollars) and the proportion of older households with home, credit card and student loan debt was significantly higher in 2016 than in 1989.

The GAO was asked by Senator Robert Casey, Jr. (D-PA), chairman of the Special Committee on Aging, and senior Republican on the committee, Senator Tim Scott (R-SC), to examine trends in the debt of older Americans and the impact on old-age pensions. This report follows a 2019 GAO report that estimated that 20% of older American households aged 55 or older had less than $ 22,000 in income in 2016, and in a 2015 report that approximately 29% of older households did not have retirement accounts (like a 401 (k) plan) nor a defined benefit plan in 2013.

While GAO typically offers a number of policy recommendations for a particular study topic, this report does not contain any.

Debt results

Overall, GAO found that trends in debt, debt stress, and negative debt outcomes vary based on demographics and economic characteristics of older Americans, including their age, creditworthiness, and where they live. However, in breaking down these trends for older Americans across different demographic and economic groups, the GAO found that some groups appeared particularly vulnerable.

For example, in 2016, higher proportions of households aged 60 or older had home and credit card debt than in 1989, the report said. In addition, from 2003 to 2019, people ages 75 to 79 often had a higher proportion of default credit card and student loan debt than people ages 50 to 74.

GAO also notes that older people with a credit score below 720 – including those with subprime, fair, or good credit – had average student loan debt over the same period, which was more than double the 2003 figure in 2019.

Low income debt stress

While older Americans’ overall debt and stress levels generally decrease with age, low-income households experienced greater debt stress, the GAO continues.

For example, a larger percentage of low wealth households held debt (including credit card balances, medical debt, and life insurance policy loans) that may be unsecured or floating rate, and this gap persisted with age. These low-income and low-income households may have fewer prospects of a secure retirement due to their indebtedness, the report notes.

In addition, GAO’s analysis of the SCF’s data found that in 2016, debt stress in black, Hispanic, and other multiracial households was roughly twice that of white households.

Health shocks

As part of its analysis, GAO also interviewed various experts who found that health shocks or unpredictable diseases could make particularly indebted people vulnerable. In this case, the negative pension effects for the surviving spouse may worsen, especially if they have used up their assets and have more debts than they were before the health shock. In addition, the negative consequences of a spouse’s death are more likely to hit women, as women tend to live longer than men, the report emphasizes.

The experts also noted that it is too early to assess the impact of the COVID-19 pandemic on pension security, in part because the provisions of the CARES Act have suspended certain debt payments. However, GAO notes that, as with previous recessions, the pandemic may further reveal the economic fragility of older Americans who, for example, have lost their jobs or are unable to work.