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Consumers Hold Unfavorable View of Debt in Retirement

American consumers apparently hold negative views of being in debt during retirement, even for so-called “good” debt, according to a new report.

Based on survey results of 945 Americans fielded in July 2017, the LIMRA Secure Retirement Institute finds that 67% of consumers believe that retirees should avoid borrowing money for any reason. These findings come even as debt held by those between the ages 65-80 increased 40% from 2003-2015, according to data by the New York Fed Consumer Credit Panel.

Consumers view mortgage debt more favorably than other types of debt, but its favorability rating drops when held during retirement versus working years. The findings show that during their working years, 34% of consumers rate the debt as bad, but the level jumps to 61% during retirement. The report further notes that two-thirds of consumers do not think people should carry mortgage debt into retirement.

Student loan debt in retirement had the highest overall unfavorability rating among the three types of debt measured, with 81% believing the debt is bad to have in retirement, compared to 63% who feel the same during working years. The report notes that student loan debt balances and prevalence are growing among those 65 and older. The number of federal student loan borrowers age 65 or older skyrocketed by 385% between 2005 and 2015, according to the Government Accountability Office. In addition, LIMRA notes that the amount of debt held by Americans age 65 and over increased from over $2 billion in FY 2005 to nearly $22 billion in FY 2015.

Meanwhile, credit card debt was viewed negatively by consumers during both working years and in retirement. It is ranked as the least favorable kind of debt to be held during working years and the second least favorable during retirement years, registering 73% and 78%, respectively. Moreover, the Institute finds that 7 in 10 consumers agree that credit card debt should not be extended into retirement.

LIMRA emphasizes that the “traditional goal of debt-free retirement is still widely prized,” and that untimely debt can compromise people’s financial security and increase both emotional and financial stress. In addition, the Institute finds that retirees with debt are less confident than those who are debt-free: 70% of retirees without debt are confident they will be able to live the lifestyle they want compared to 51% of retirees holding debt.

If debt among older Americans continues to increase, strategies to help retirees manage that stress will become more important, opening an opportunity for financial services firms to help consumers manage their debt, according to the report.