Fewer Americans in debt but have larger amounts

Fewer Americans are burdened with debt, but those with debt have more of it, and debt levels held by older residents have soared, according to a report released Thursday by the U.S. Census Bureau.

About 69 percent of U.S. households had some form of debt in 2011, down from 74 percent in 2000, the report said. But median household debt increased by almost $20,000 during that time frame.

Senior citizens with debt saw their debt loads more than double, and experts said debt later in life is troubling considering Americans often have inadequate savings and may be forced to delay or nix retirement plans.

“It has an impact on when, if ever, you can retire,” said Melodee Sheils, director of Consumer Credit Counseling Service in the Miami Valley. “And it impacts (how much) you can afford to set aside for retirement.”

The portion of U.S. households that have debt has declined every year since 2002, and younger households are more likely to have shunned debt. The share of households 35 years old and younger with debt fell to 72 percent in 2011 from 81.5 percent in 2000.

Many people sheathed the plastic. In 2000, a little more than half of households had credit card debt. Eleven years later, it decreased to slightly more than one-third of households.

During that time period, every age group saw declines in the percentage of households with debt, except seniors.

But as many Americans stopped borrowing, those who continued took on heavier debt loads.

In 2000, U.S. households had a median debt of about $50,971. That rose to $70,000 in 2011. The median means 50 percent of households have less debt and 50 percent have more. The data was adjusted for inflation.

Many Americans lost the ability to borrow money after the recession began because banks tightened their lending standards, and many people did not qualify for loans because they were unemployed, underemployed or their homes values plummeted, Sheils said.

Many homeowners are “underwater,” meaning they owe more on their homes than the properties are worth.

Some people filed for bankruptcy during the downturn, and they were able to discharge their debt obligations by defaulting on their loans.

While eliminating debt is important to financial health, the economy heavily depends on borrowing. Taking on debt is essential to buying a home or paying for other big-ticket items, such as cars and home repairs. Some Americans reduce consumption when they have large debt payments, and that can be a drag on the economy.

Senior citizens saw the largest percentage increase in debt loads between 2000 and 2011: They more than doubled to $26,000 from $12,072. Americans 55 to 64 years old saw their debt increase 64 percent to $70,000 from $42,654.

Americans who still had access to credit after the economy crashed may have borrowed to continue paying their bills or financially support their adult children or other relatives, Sheils said.

“Their children and their grandchildren can’t get credit and don’t have jobs and are looking to them for help,” she said. “Sometimes they get deeper into debt to help a family member.”

Studies show baby boomers dug themselves into significant consumer debt during the recession, because people lost their jobs or took pay cuts, cared for elderly parents, put their children through college and coped with rising medical debt, according to the AARP. Debt can cook a nest egg.

“Retiring with debt means that they’re going to have less resources than what they expected in retirement (because) those resources will be used for debt,” Mauricio Soto, a research associate at the Urban Institute in Washington, D.C., told the AARP. “Many people will realize they might have to extend their work life to pay their debt.”

Many Americans face financial insecurity in retirement because they did not save enough and did not have access to or participate in an employer-sponsored retirement plan.

In a March 18 article, the Dayton Daily News reported that nearly two-thirds of older Americans rely on Social Security retirement benefits for at least half of their income.

More than one in three Americans rely on Social Security for at least 90 percent of their income.

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