Can You Guess What Percent Of People Retire With No Debt? Hint: The Majority Aim To Do So, But Less Than 25% Succeed

Retirement is supposed to be the moment you finally stop stressing about money, right? Unfortunately, for most Americans, that's not the case. According to a study from the Boston College Center for Retirement Research, eight in 10 middle-income Baby Boomers are still grappling with some form of debt. Moreover, nearly 30% of these retirees allocate over 40% of their monthly income to debt payments.

Even though more than half of Boomers plan to retire debt-free, the numbers tell a different story. A survey by the Employee Benefit Research Institute (EBRI) reveals that only 23% of retirees aged 65 to 74 achieve that goal. Among those 75 and older, the percentage is slightly better at 46%, but that still means more than half of retirees in this age group carry some form of debt.

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A Growing Trend: Debt in Retirement

The increase in debt among retirees isn't new – it's been building for decades. For instance:

• In 1989, just 58% of older households had debt. By 2016, that number had jumped to 71%.

• Households led by individuals 65 and older saw their debt rise from 41.5% in 1992 to 60% in 2016.

• The percentage of those aged 75 and up with debt has climbed from 21% in 1989 to 53% in 2022.

These numbers show a significant shift in how retirees manage their finances. While not all debt is "bad" – a manageable mortgage, for example – the prevalence of high-interest debt, such as credit cards, is a major concern.

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Why Are Retirees Still in Debt?

So, what's driving this trend? Several key factors are at play:

• Rising Costs: Healthcare, housing and basic living expenses have skyrocketed, leaving many retirees to lean on credit to make ends meet.

• Insufficient Savings: Numerous studies have shown that many retirees don't have enough savings to sustain their desired lifestyle. The National Council On Aging reports that 80% of households with older adults are either financially struggling or at risk of falling into economic insecurity.

• Extended Mortgages: Unlike previous generations, many retirees still have mortgages into their 70s and beyond, which adds significant financial strain.

What Debt Does to Retirement Dreams

Debt in retirement isn't just a financial problem – it can have a ripple effect on quality of life:

• Less Disposable Income: Debt payments eat away at monthly budgets, leaving little for travel, hobbies or emergencies.

• Higher Stress Levels: Financial insecurity can lead to anxiety, which can take a toll on mental and physical health.

• Fewer Choices: Being saddled with debt often means limited flexibility regarding lifestyle decisions, like downsizing or relocating.

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How to Tackle Debt Before (or During) Retirement

Here's the good news: You can get ahead of the curve with some planning. Here are a few strategies to consider:

1. Start Early: The earlier you start chipping away at debt, the better. Prioritize paying off high-interest loans like credit cards.

2. Set a Realistic Budget: Know exactly where your money goes and stick to it.

3. Consolidate Debt: Consolidating multiple high-interest loans into one payment with a lower rate could save you money.

4. Consult a Pro: A financial advisor can help you develop a strategy tailored to your unique situation.

While most people hope to retire debt-free, less than 25% of retirees achieve that goal. The key takeaway? Whether nearing retirement or still years away, prioritizing debt management is crucial.

If you're unsure where to start, consider contacting a financial advisor who can help you assess your situation and create a plan that works for you. It's never too late – or too early – to take control of your financial future.

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