Retirees are bringing unprecedented levels of student loan debt into their later years, according to a new report that shows Baby Boomers may be woefully unprepared for retirement.
The result of helping their kids or grandkids pay for college, those ages 65-74 have nearly six times the amount of education debt now than they did two and a half decades ago, when they had almost none, according to an analysis of government data by LIMRA Secure Retirement Institute. The burden is leaving them vulnerable to financial hardship because they have less available for saving or covering unexpected expenses, LIMRA data show.
For retirees in this age group, education debt has grown from less than 1% in 1989 to 15% of the overall "installment" debt they have in retirement. LIMRA analyzed data from the government's triennial Survey of Consumer Finances; the most recent one, out last fall, pertains to 2013.
The increase in education debt for retirees is "drastic," says Mike Ericson, the LIMRA research analyst who put together the report. "That's a type of debt that can hinder people being able to retire on time," he says. "And that's one type of debt you really don't want to have in retirement."
LIMRA data show that when it comes to finances, Americans are most concerned about "having enough money for a comfortable retirement," which has been the number one concern for the past five years in an annual survey LIMRA conducts. With college costs rapidly rising, parents of Millennials are taking on more debt to put their kids through school, hindering their ability to save for retirement.
Those with education debt in retirement have an average of more than $2,300, compared with an average of $400 in 1989. Pre-retirees, 55-64 have even more education debt, accounting for 30% of the total installment debt they carry at an average of a little less than $8,000.
Retirees also have more mortgage debt and auto debt than in past decades, contributing to financial vulnerability at a time when they have less income to fall back on. Many are unprepared for financial emergencies; 38% of those 55 and older have nothing saved to cover unanticipated expenses, according to a 2012 LIMRA study.
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The most recent report also shows the under-35 crowd may have even more difficulty saving for retirement. The average amount of education debt for this age group hit more than $19,500 in 2013. In 1989, the average education debt was $3,000. Now student loans account for nearly 70% of the installment debt Millennials have.