February 18, 2019
Debt is a major barrier to financial well-being among Americans. While we tend to think of debt as an issue affecting young and middle-aged people, the truth is that senior citizens carry debt, too. Among seniors approaching retirement, debt can be an obstacle to maximizing savings. Retirees living on a reduced income may find debt especially crippling in an economy of rising costs.
Using an anonymized sample, LendingTree analyzed 2018 second quarter credit report data for 75,000 My LendingTree users aged 65-70 across the fifty largest metropolitan centers in the US. They calculated three main metrics: median non-mortgage debt balances; distribution of debt by type (auto loans, credit cards, personal loans, student loans); and average credit score. The results might surprise you.
The Average Median Non-Mortgage Debt Among Retirement-Aged Seniors is More Than $20,000
If you assumed debt doesn’t affect senior citizens, think again. Among the 75,000 senior borrowers in the LendingTree study, the average median non-mortgage debt is $20,643.
What kind of debt? It’s mostly auto loans (37.9%) and credit card balances (35.9%), with some student (13.2%) and personal loans (12.9%) in the mix. That’s right, more than 1 in 8 dollars of debt was for student loans, which was even more than the balance owed for personal loans!
Texas Retirees Carry the Most Non-Mortgage Debt
When ranking the fifty largest metros in the US based on median non-mortgage debt among seniors aged 65-70, an interesting finding emerges: the four cities with the highest debt are all in Texas.
Senior residents of San Antonio have the highest median non-mortgage debt at $29,993. The next-highest level of debt is found in Austin, followed closely by Houston and Dallas.
Here are the ten cities with the highest levels of non-mortgage debt among seniors 65-70, starting with the highest:
1. San Antonio, TX: 29,993
2. Austin, TX: $26,424
3. Houston, TX: $26,219
4. Dallas, TX: $25,604
5. Washington, DC: $25,202
6. Oklahoma City, OK: $24,644
7. Richmond, VA: $23,642
8. Virginia Beach, VA: $23,398
9. Buffalo, NY: $22,482
10. Memphis, TN: $22,334
Of the almost $30,000 median non-mortgage debt among borrowers aged 65-70 in San Antonio, 45.7% is auto loans, 32.1 % credit cards, 15.1% personal loans, and 7.0% student loans. Compared to the other 49 metros included in the sample, San Antonio has the highest distribution of auto loan debt and the lowest distribution of student loan debt.
On the topic of these results, Senior Research Analyst at LendingTree, Kali McFadden says, “We’ve actually done a similar review, but for millennials, and found that younger people in Texas had higher non-mortgage debt balances than their peers, so yes, I think it’s fair to say that there’s something going on in Texas. And I think it’s auto loans. Our previous research has shown that millennials in Texas carry some of the highest median auto loans in the country, and I would be surprised if that didn’t hold true for people aged 65 to 70.”
Retirees in Louisville, KY, Enjoy the Lowest Levels of Non-mortgage Debt in the Country
Seniors aged 65-70 living in Louisville, KY, have the lowest median non-mortgage debt among the study sample at only $15,093. That’s $5,000 lower than the sample average of $20,643 and almost half of the $29,993 found in San Antonio.
These are the ten cities where retirement-aged seniors have the lowest non-mortgage debt, starting with the lowest:
50. Louisville, KY: $15,093
49. San Jose, CA: $15,499
48. Portland, OR: $16,224
47. Sacramento, CA: $16,910
46. Milwaukee, WI: $17,142
45. Detroit, MI: $17,490
44. Providence, RI: $18,356
43. San Diego, CA: $18,377
42. San Francisco, CA: $18,495
41. Nashville, TN: $18,567
Of the $15,093 median non-mortgage debt carried by retirement-aged seniors in Louisville, 41.3% is credit card balances. The other 59% is made up of auto (32.4%), personal (14.8%), and student loans (11.6%). Compared to the sample average, a lower proportion of Louisville retiree debt comes from car loans, and a higher proportion comes from credit cards.
Silver Lining: Seniors Have Decent Credit Scores
The non-mortgage debt levels among retirees in this sample are sobering. Silver lining? The average credit score is 701 – not too shabby. San Francisco has the highest average credit score at 711, while Memphis came in lowest at 694. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.
Debt is a Major Obstacle in Retirement
Debt can be detrimental to financial health when too much income goes towards interest payments. This type of situation restricts cash flow and makes addressing other financial goals – like saving – difficult. This is particularly problematic for seniors who are approaching retirement and need to ramp up their savings, or for those trying to manage their obligations on a reduced income.
McFadden cautions, “People going into retirement need to have a very clear understanding of what their income is going to be, including tax considerations.From there, they need to sit down and create a budget that includes their loan and debt payments. Is it doable? If not, they should consider consolidating their debt in such a way that their monthly payments are low enough to also allow them to save for emergencies and other contingencies, while paying down the debt as quickly as possible under the circumstances.”
MoneyTips’ Debt Optimizer can help make debt more manageable for people of all ages by reducing your interest payments and lowering your debt.