In a new issue brief, the Employee Benefit Research Institute (EBRI) explored the effects of debt on families with family heads who are age 55 or older, as well as those of different racial/ethnic groups.

“Much of the attention to retirement preparedness focuses on asset accumulation in individual account retirement plans, as well as the presence of defined benefit [DB] plans, but the other side of the balance sheet—debt—can potentially have a significant impact on the financial success of an individual’s retirement,” EBRI says. “Any debt that a family may have accrued entering or during retirement can offset any asset accumulations, resulting in less retirement income security.”

In the issue brief, EBRI looks at debt in two ways: debt payments relative to income and debt relative to assets.

EBRI found that debt among American families whose heads are 55 and older increased continuously from 1998 to 2019. In 2019, 68.4% of such households were carrying debt, up from 53.8% in 1992. Among families with heads 75 or older, the share having debt increased from 41.3% in 2013 to 51.4% in 2019.

The average debt for families with heads 55 or older was $88,245 in 2010. By 2019, this decreased slightly to $82,481.

Debt payments as a percentage of income fell from 11.4% in 2010 to 9.2% in 2019, and debt payments as a percentage of assets declined from 8.4% to 6.8% in that time.

Last year, housing debt was the biggest debt households faced; however, the incidence of credit card debt increased. Still, families with heads younger than age 55 have a higher probability of having debt and higher debt payments as a percentage of income than families with older heads.

Families with Black/African American or Hispanic heads had much higher debt-to-asset ratios than families with white, non-Hispanic heads, and their debt is more likely to be the result of consumer debt than it is housing debt.

“This is troubling because while families can build wealth through homeownership,” EBRI says, “they cannot through consumer debt. Further, families with minority heads, particularly those with Hispanic heads, were more likely to have debt payments more than 40% of their income.”

EBRI says debt among older households is hurting their retirement prospects, and “American families with heads just reaching retirement or those newly retired are more likely to have debt—and higher levels of debt—than past generations. Furthermore, the percentage of families with heads ages 75 or older having debt, including credit card debt, is at its highest level since 1992. Thus, more and more families are carrying debt into and throughout retirement.”

EBRI says this can be rectified throughout financial wellness programs that help people shore up their personal balance sheets.

“While these programs are in their infancy for the most part, they at least show signs of helping the individuals that engage with them,” EBRI says. “Help with financial well-being may not only benefit workers while they work, but the skills learned could be carried over to retirement to potentially address the growing issue of debt in older ages. Further evaluation of the impact of financial well-being programs is needed to see what programs have the desired outcome of reducing or controlling debt. Also, additional research on the drivers of the differences in assets and debts between ages and races/ethnicities are needed.”