Retired People of Color Struggle with Debt

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The oldest minority retirees are struggling with debt, a new Urban Institute study finds.

The researchers’ starting point is that people generally reduce their debt as they age. To prepare for retiring, older workers try to pay down their mortgage balances and pay off credit cards. Once retired, their debt continues to shrink.

But on closer inspection, retirees in their 70s and 80s in the nation’s predominantly minority neighborhoods have shed less of their debt than their counterparts in mostly white neighborhoods, who tend to be better off financially.

In a sign of financial distress among the oldest lower-income and minority retirees, 20 percent of their loans go to collections for non-payment – double the rate for higher-income and white retirees. Minority retirees also have lower credit scores and longer spells of poor credit, according to the study, which compared U.S. households with debt in four age groups: 50s, 60s, 70s, and 80s.

The researchers concluded that disadvantaged retirees “may heavily rely on debt to support their standard of living in retirement.”

To get some perspective on this racial disparity, first compare workers in mostly white and mostly minority neighborhoods. White households in their 50s typically owed $43,000 on their credit cards, car loans, and mortgages in 2019, the most recent year of survey data.

But in minority neighborhoods, 50-somethings owe half as much – in large part because financial companies and mortgage lenders extend less credit to lower-income customers.

(These debt levels may seem small, but the analysis included renters, who don’t have a mortgage, which is the single largest debt for most Americans, and homeowners who have whittled down their mortgages or even paid them off entirely).

For retirees, the racial pattern is very different. Borrowers in their 80s in minority neighborhoods typically owed $3,250 in 2019 – more than their white counterparts. And $3,250 is a substantial burden for retirees relying mainly on Social Security. Since they’re more likely to be renters, the debt is concentrated in auto loans and high-rate credit cards, which aren’t backed by an appreciating asset like a house.

The problem for these borrowers, the researchers concluded, is that debt makes them “less financially resilient to various shocks common at those ages, such as a catastrophic health event or the death of a spouse.”

To read this study, authored by Barbara Butrica and Sipica Mudrazija, see “Financial Security at Older Ages.” 

The research reported herein was derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium.  The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College.  Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report.  Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.


The story is a bit more nuanced than this paper suggests. Debt is a bit like cholesterol. Just as with cholesterol, there is good debt and bad debt. High SES folks have more good debt (low interest rate mortgages they can afford to repay) and low SES folks have more bad debt (credit cards they can’t afford to repay. But this is why god created chapters 7 and 13 of the bankruptcy code.

Wendy Weiss

That is probably why Michelle Singletary, (Washington Post Personal Finance Columnist) said the first of the new rules of retirement is to pay off debt, especially high interest debt.


    That article is elder abuse. Debt can be good if it gets you to a more preferred point on the efficient market frontier. Of course, entering retirement with debt and no assets is going to end badly. But entering retirement with a plump 401(k) and a low interest rate 30 year fixed mortgage can make perfect sense. As always, it depends on the individual’s ability and willingness to bear risk.


The key is to make the “right” personal financial decisions during one’s working years, so as not to approach retirement with this problem. My four siblings and I — all (black) boomers born between 1946-1962; I’m in the middle — are one-by-one now entering retirement, none of us being in the dire financial circumstances mentioned in the article. (Our parents entered retirement with no debt; they taught us well.)

To not have to heavily rely on debt to support their standard of living in retirement, one has to make the right financial, lifestyle, and personal decisions much earlier in life. Otherwise, even the basics may be out of reach in retirement.


I don’t think debt really cares about skin color. I agree that some people are marginalized when it comes to jobs and income, but debt can still be avoided. I think we live in a very hyper-consumer society, and that makes it hard to stay debt-free. A bit more frugality is needed! And more so in the African American society.


    You might be right but on the other hand, it’s quite difficult to avoid debt when you have been marginalized in almost every sector of society. To make things worse, our current society pushes for materialism so that makes it even harder.

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