Retirees Face New Challenge: Mounting Student Debt
Retirees will continue to face financial difficulties over the course of 2019, stemming from perennial problems like pensions, personal finances, social security benefits and even leftover debt from student loans. This is according to a column at MarketWatch examining the current state of the financial landscape for retirees, and accompanying data from the Federal Reserve and Consumer Financial Protection Bureau (CFPB).
On top of many retirees not having saved enough in retirement, longtime financial burdens for older Americans continue to weigh on the finances of seniors. These include credit card debt, mortgage debt, and taking care of children. Still, another more surprising source of financial difficulty among seniors, according to MarketWatch and data from the CFPB, is outstanding student debt.
Student debt and related delinquencies among Americans aged 60 and over are increasing, according to an August 2017 report by the CFPB. These can be sourced from both the older borrower’s own education, along with people they aim to help.
“Consumer complaints show that older borrowers who are repaying loans for their own education, co-signing loans for someone else’s education, or borrowing on their children’s behalf, may struggle to repay these loans while living on fixed incomes during retirement,” the CFPB report says.
“Older adults are more likely to have retirement savings and to view their savings as on track than younger adults,” according to the Federal Reserve in 2018. “Nevertheless, even among non-retirees in their 50s and 60s, one in eight lacks any retirement savings and less than half think their retirement savings are on track.”
While Social Security beneficiaries will find their first substantive cost of living adjustment (COLA) this year at an increase of 2.8 percent – the first major increase in seven years – that welcome bump in benefits will do little to increase quality of life for those who qualify for payments.
“If you’re an average, single middle income earner and plan to retire this year at age 62 – the earliest a person can begin taking Social Security – you’ll get $17,532 this year,” MarketWatch notes. “That’s well above what the federal government considers the official poverty level for a single person: $12,060.”
However, the official poverty level is artificially reduced, according to research by the Schwartz Center for Economic Policy Analysis at the New School in New York, N.Y.
“Inadequate retirement accounts will cause 8.5 million middle-class older workers and their spouses – people who earn over twice the official poverty line of $23,340 (if single) or $31,260 (if coupled) – to be downwardly mobile,” the New School research concludes, causing seniors to fall into poverty or near poverty in old age.
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