Retirees are finding it harder to manage their finances, facing rising credit card debt and struggling to keep up with living costs. According to a 2024 survey by the Employee Benefit Research Institute (EBRI), more than two-thirds of retirees had credit card debt, a significant jump from just 40% in 2022. This growing financial pressure is linked to higher prices that continue to affect those on fixed incomes, even as inflation has eased somewhat from its peak.
Rising Credit Card Debt Among Retirees
One of the main concerns highlighted in the EBRI survey was the sharp increase in credit card debt among retirees. By 2024, over 66% of retirees were dealing with credit card debt, compared to 40% in 2022. This rise shows how difficult it has become for retirees to manage day-to-day expenses, with many struggling to balance fixed incomes against ongoing living costs.
High Prices Strain Retirees’ Budgets
While inflation has slowed from its 2022 peak, prices for goods and services remain high. This ongoing strain has hit retirees particularly hard. The survey revealed that in 2024, nearly one-third (31%) of retirees admitted to spending more than they could afford. This was almost double the number from 2022, when only 17% reported overspending.
High prices for essentials like food, housing, and medical care are particularly challenging for retirees who depend on fixed sources of income. With inflation still above the Federal Reserve’s target of 2%, managing monthly expenses has become increasingly difficult.
Retiring Earlier Than Expected
A surprising finding from the survey was that nearly 60% of retirees said they left the workforce earlier than they had planned. Health problems or disabilities were the most common reasons for early retirement, cited by 38% of respondents. Another 23% said they retired due to changes at their workplace, such as layoffs or restructuring.
Insufficient Retirement Savings
Early retirement often leaves people with less time to build up savings. The survey showed that nearly half of the retirees admitted they hadn’t saved enough for a comfortable retirement. This lack of savings has forced many to rely more heavily on credit cards, leading to the current spike in debt.
Limited Use of 401(k) and IRA Accounts
Another point from the EBRI report was the limited use of retirement plans such as 401(k)s, IRAs, and Roth IRAs. Only 17% of retirees said they were using funds from a 401(k) as a source of income, and only 20% reported drawing from IRAs. This suggests that many retirees either didn’t have access to these savings plans or didn’t maximize their benefits while working.
Dependence on Social Security and Pensions
The survey showed that a large portion of retirees depended on Social Security as their main source of income, with 80% saying they relied on it. Additionally, 39% reported having income from pensions or annuities. While these sources provide a guaranteed income, they often fall short of covering all living expenses, especially when unexpected costs arise.
Impact of Rising Debt and Costs
The combination of credit card debt, high living costs, and insufficient savings has created a challenging environment for retirees. With limited ways to increase income, many are left cutting back on non-essential spending, dipping into savings, or taking on more debt to make ends meet.
What Retirees Can Do
For retirees facing financial stress, there are a few strategies that can help:
- Budget Adjustments: Creating and sticking to a budget can help manage expenses more effectively.
- Debt Management: Seeking advice from financial counselors can help retirees reduce high-interest debt.
- Maximizing Benefits: Retirees should explore any available state or local assistance programs to help with costs like food and medical expenses.
- Investment Strategies: Consulting a financial advisor could help retirees make the most of their remaining assets.
Part-Time Work: For those able, taking on a part-time job could help supplement income and ease financial pressures. Addressing these challenges requires careful planning, debt management, and maximizing available resources.
