Will Debt Hinder Your Retirement Outlook?
One key takeaway from the trend, as cited by a Federal Reserve economist, is that since the Great Recession there has been a significant shift in the allocation of debt away from younger consumers with weaker repayment records to older individuals with strong repayment histories.2
While on the surface, this shift should not be cause for concern, if debt levels were to rise to the point where older Americans were struggling to repay debt as they entered retirement, the story could play out quite differently.
Is Debt an Obstacle to Your Retirement Readiness?
The Employee Benefit Research Institute’s annual Retirement Confidence Survey has consistently made a connection between the level of debt and retirement confidence. For instance, citing reasons why they are not saving (or not saving more) for retirement, workers pointed to their current level of debt as a key obstacle. Just 6% of workers who describe their debt as a “major problem” say they are very confident about having enough money to live comfortably throughout retirement, compared with 35% of workers who indicate debt is not a problem. Overall, 51% of workers and 31% of retirees reported having issues with debt.3 Types of Debt Held by Workers and Retirees| Type of Debt | Workers | Retirees |
| Home mortgage | 46% | 23% |
| Car loan | 38% | 17% |
| Credit card | 37% | 27% |
| Student loan | 23% | 3% |
| Health/medical | 21% | 14% |
| Home equity line of credit | 15% | 17% |
| Loan from workplace retirement plan | 5% | 1% |
| Home improvement loan | 4% | 4% |
| Other | 17% | 9% |
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