Many Americans are so deeply in debt that they don’t anticipate ever getting out of it. According to the Federal Reserve Bank of New York, “credit card debt has reached peak highs, entering levels that have not been seen since the 2008 financial crisis. Monthly payments are high enough to eat into not only expendable income but also necessary retirement savings.”¹
Today, consumer debt in America is at $13.51 trillion. With debt on the rise, we’re seeing more Americans carry those outstanding balances further into their lives—some well into retirement, and others even to the grave. In fact, “ 25% of people who have debt think they’ll die before paying it off.”²
In households with workers 50+, “only 18% report that [they’re] debt free.” And “1 in 6 workers 50+ have taken a loan from a 401(k) or similar plan, or IRA.” Most common reasons for taking out loans range from “paying off some other form of debt (23%), a major unplanned expense (24%), a financial emergency (16%) or medical bills (16%).”
That’s a stark picture to paint and, unfortunately, it doesn’t get much brighter. A shocking “65% of adults with debt don’t know when or if they will ever be able to pay [it off].” And “only 1/3 of Americans (35%) see debt freedom in their future.”
The trend of debt in America is particularly worrisome for older Americans. “Debt is eating away at the ability to save for retirement, and for those who do have retirement savings, they are finding themselves borrowing from it to ease debt burdens.” Today, “44% of Americans between the ages of 60-70 expect to be paying their mortgages for at least 8 more years, while 17% say they may never pay it off.”³
And what makes matters worse, as people age, they’re likely to face health problems and medical conditions that drive up debt. Unfortunately, “more than 84% of people age 65+ are coping with at least one chronic condition, and most tend to encounter more as they age.” And “out of pocket expenditures in the 5 final years leading to an individual’s death average a total of more than $38,000, leaving 1 in 4 seniors approaching bankruptcy.” From a macro perspective, “people age 60 and over owe roughly 30% of the cumulative national credit card debt, with balances totaling nearly $260billion.” And even if they delay retirement, seniors aren’t exactly first in line for job opportunities and they have fewer years to build up their savings, leaving them with very few and limited options to manage their debt and get things back on track.
And there’s more. Cut backs from government support “including things such as raising the retirement age, requiring seniors to pay more out-of-pocket costs, and the shift of risks from the government to individuals”⁴ continue to make things harder for the elderly.
What Financial Institutions Can Do
The elderly are one of our society’s most vulnerable populations. In general, they’re faced with an array of difficulties from an increase in medical expenses to decrease in employment opportunities. Fortunately, however, we live in a time with so many technological advancements and innovations that make finances much easier.
Financial institutions are especially well positioned to help the elderly, along with every generation, create better financial habits that set them up for success. Tools like digital money management and self-guided financial wellness applications take the complexity out of managing finances with simple and sophisticated AI-driven nudges. With these types of technologies, financial institutions can become true advocates, helping their customers shape good financial habits and stay informed. The more well informed people are about their finances, the better they can plan for what’s ahead—from budgeting smarter and tracking expenses to setting long-term goals.
How MX Can Help
At MX, we work with financial institutions that are just as dedicated as we are to making the world financially strong. We help financial institutions access and act on their data so they can really know their customers and help them make the best financial decisions at every point of their financial journey. We also give financial institutions the digital tools their customers want—from mobile banking and personal financial management to conversational AI notifications and predictive insights. In this way, financial institutions can become much more than the simple go-to when it comes to transactional interactions, deepening customer relationships every step of the way.
Help your customers better plan for what’s ahead by partnering with MX>>