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WSJ: Retirees Make Cutbacks as Debt Rises Fivefold in 20 Years

WSJ: Retirees Make Cutbacks as Debt Rises Fivefold in 20 Years

(Dreamstime)

By    |   Thursday, 16 February 2017 03:51 PM

Senior citizens are confronting the grim reality of having to work longer or make drastic spending cuts as they cope with crushing debt, The Wall Street Journal reports.

People ages 65 to 74 have five times as much debt as elderly Americans held two decades ago, the Employee Benefit Research Institute concluded after studying federal data.

Meanwhile, median savings for U.S. households nearest to retirement has collapsed by 32 percent to $14,500 in the past decade, according to an analysis of federal data by the Economic Policy Institute.

“This is the first time where we have seen such a high degree of debt held by people at such a late stage of life,” Torsten Slok, chief international economist at Deutsche Bank AG, told the WSJ.

The newspaper interviewed a retired woman who had to flee California’s high cost of living and settle in a small town in Iowa after her assets got wiped out during the 2008 financial crisis. She had $15 in the bank before selling her house at a loss and setting up a payment plan with creditors, according to the newspaper.

Debt levels used to peak for people in their 40s. Not anymore.

Debt held by borrowers between the ages of 50 and 80 jumped about 60 percent from 2003 to 2015, while debt among younger borrowers declined, according to Federal Reserve data cited by the WSJ.

Crisis-Level Debt

The Federal Reserve Bank of New York on Thursday reported that total household debt increased "substantially" by 1.8 percent to $12.58 trillion in the fourth quarter.

“This marked the largest quarterly increase in total household debt since the fourth quarter of 2013, and debt today is now just 0.8 percent below its peak of $12.68 trillion reached in the third quarter of 2008,” the New York Fed said in a statement.

Every type of debt climbed from the previous quarter, with a 1.6 percent increase in mortgage debt, 1.9 percent rise in auto loan balances, a 4.3 percent jump in credit card balances and a 2.4 percent percent addition to student loan balances.

This boost in balances was in part driven by new extensions of credit, with a large increase in the volume of mortgage originations and a continuation in the strong recent trend in auto loans.

The report is based on data from the New York Fed's Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data.

"Debt held by Americans is approaching its previous peak, yet its composition today is vastly different as the growth in balances has been driven by non-housing debt," Wilbert van der Klaauw, senior vice president at the New York Fed, said in a statement. "Since reaching a trough in mid-2013, the rebound in household debt has been led by student debt and auto debt, with only sluggish growth in mortgage debt."

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Senior citizens are confronting the grim reality of having to work longer or make drastic spending cuts as they cope with crush debt, The Wall Street Journal reports.
retirement, debt, elderly, bankruptcy
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2017-51-16
Thursday, 16 February 2017 03:51 PM
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