Good debt, bad debt—retirees don’t want it.
“LIMRA Secure Retirement Institute finds consumers attitudes towards being in debt, even so called ‘good’ debt, is negative during retirement,” according to the organization. “The institute finds 67 percent of consumers believe retirees should avoid borrowing money for any reason.”
Citing the New York Fed Consumer Credit Panel, it adds that debt levels for those aged 65 to 80 increased 40 percent from 2003 to 2015, and retirees with debt are less confident than those who are debt-free.
Seventy percent of retirees without debt are confident they will be able to live the lifestyle they want, while only 51 percent of retirees holding debt feel the same way.
Unsurprisingly, consumers view mortgage debt more favorably than other types of debt, but “its favorability lessens when held during retirement versus working years.”
While two-thirds of consumers see mortgage debt during working years as “good” debt, only 4 in 10 feel the same about it in retirement, LIMRA notes. Two-thirds of consumers don’t think people should carry mortgage debt into retirement.
Longer life spans and “second career” goals mean student loan debt balances and prevalence are growing among those 65 and older.
According to Government Accountability Office (GAO) the number of federal student loan borrowers 65 or older rose by 385 percent between 2005 and 2015.
“The amount of debt held by Americans ages 65 and over increased from over $2 billion to nearly $22 billion,” LIMRA says. “Being in default of a federal student loan debt can result in a reduction of Social Security income used to repay the debt. As of 2015, the GAO observed 5 percent of borrowers 65 or older are facing this reality. The Institute finds student loan debt ranks as the least favorable debt to have in retirement, with 81 percent of consumers viewing student loans as ‘bad’ debt.”