The Most Common Debt Americans Carry Into Retirement

While many working-age individuals worry about not saving enough money for retirement, especially as factors like inflation and student loans strain their budgets, those who are already at, or near, retirement age face issues with debt. In fact, according to the Federal Reserve's Survey of Consumer Finances, households led by individuals aged 65 to 74 held an average of $45,000 worth of debt in 2022 — a figure that has more than quadrupled since 1992. This means retirees are more likely than ever to retire with financial liabilities. And the most common form of debt Americans over 50 are likely to carry, according to a 2024 survey from AARP, is credit card debt. 

While ideally, credit card debt is a burden you should never bring into retirement, many are not so fortunate. Inflation and the increased cost of living are a big part of why many older Americans are carrying credit card debt into retirement. According to the Federal Reserve's latest data, households led by someone aged 65 to 74 have an average of $7,720 in credit card debt. The biggest debt contributors were housing costs, healthcare, everyday expenses, and vehicle payments, based on AARP's data. Unfortunately, carrying credit card debt later in life can have serious implications for retirement living, including increasing a retiree's likelihood of running out of money. Luckily, this liability can be managed and eliminated with various strategies.

The first step to managing credit card debt in retirement is knowing all your debts in detail. It can be a good idea to create a list with every credit card you have, noting each balance, monthly minimum payment requirement, and interest rate. Seeing the outstanding balances in one place can help retirees understand whether their current income can realistically meet all their minimum payments. For individuals who cannot, it could be worth negotiating with their bank or card issuer for temporary hardship programs. These programs can help retirees secure lower interest rates or payments, accelerating debt elimination.

When deciding what cards to pay off first, retirees should always make at least the minimum monthly payment for all credit cards. However, it can be more beneficial to focus on the cards with the highest interest rate first rather than on those with the smallest balance. This is known as the debt avalanche method, and it's the best way to pay less interest over time. While this approach might be harder for individuals on fixed incomes, there are a number of bills that retirees can rethink that might free up a bit more money for debt repayment.