What Are the Implications of Rising Debt for Older Americans?

The share of older Americans with debt has been on the rise in recent decades, raising concerns about their financial security in retirement.  However, having debt does not always signal financial fragility, so understanding the distinctions in household debt is crucial to determining the implications of this trend.  Using data from the Survey of Consumer Finances and Health and Retirement Study, this study identifies which older borrowers are at high risk and low risk of financial hardship, determines whether the growth in borrowing is driven by high- or low-risk households, and identifies different types of high-risk households.  The results suggest that more than half of older borrowers are at high risk, and this group is driving the growth in debt holding.  Four subgroups of high-risk borrowers stand out, each with different characteristics.  Thus, no one-size-fits-all solution exists, so recognizing the diverse characteristics of high-risk borrowers is essential to developing effective policies to help them.