What Percentage of Retirees Are Debt-Free?

Financial well-being in retirement is a significant concern for many individuals as they approach their later years. Understanding the role of debt in this phase of life is crucial for both those currently retired and those planning for it. Debt can significantly influence financial security, impacting available income and overall lifestyle during what is often considered a period of reduced earnings. Examining the prevalence of debt among retirees provides valuable insights into the financial landscape of this demographic.

Percentage of Debt-Free Retirees

The percentage of retirees living completely debt-free is small, with most carrying some form of financial obligation into their post-work years. A January 2025 analysis indicated that 97.1% of retirement-age adults (aged 66 to 71) carry non-mortgage debt. When considering all forms of debt, including mortgages, the proportion of truly debt-free retirees is even lower.

Trends over time show an increasing prevalence of debt among older Americans. Data from the Federal Reserve indicates that debt among households headed by individuals aged 65 to 74 quadrupled between 1992 and 2022, and for those aged 75 and up, it increased sevenfold. In 2022, 53% of households headed by someone 75 and older had debt, a notable rise from 32% in 1992. Analysis of Survey of Consumer Finances data revealed that 71% of older households carried debt in 2016, up from 58% in 1989.

The median debt amount for older households with debt was approximately $55,300 in 2016, about three times higher than the $18,900 reported in 1989, when adjusted for inflation. This increase in debt burden extends across income levels, with low-income, middle-income, and high-income older individuals all experiencing a rise in debt prevalence over recent decades.

Common Debt Types in Retirement

Retirees often contend with several types of debt, with some being more prevalent than others. Mortgage debt frequently represents the largest single liability for many older homeowners. Approximately 30% of retirees reported having mortgage debt in 2022, and about 26% of retired investors were still making mortgage payments as of July 2024. The share of households aged 65 and over with mortgage debt nearly doubled from 21% in 1989 to 40% in 2010, reflecting a growing trend of carrying housing debt into retirement. Mortgages can constitute a substantial portion of the overall debt held by older adults, accounting for roughly three-quarters of the debt for those aged 70 and above.

Credit card debt is another widespread financial burden among older Americans. A January 2025 analysis indicated that 92.6% of retirement-age adults (aged 66 to 71) carried credit card debt. An AARP survey from March 2025 found that 47% of adults aged 50 and older carried credit card debt, with 52% of those aged 50 to 64 having such balances. This type of debt can accumulate due to various factors, including unexpected expenses or the need to cover basic living costs.

Auto loans are common among retirees; 36.8% of retirement-age adults (66-71) had outstanding auto loan debt, and 23% of retirees reported carrying car loans in 2022. Medical debt affects 11% of retirees. In 2020, unpaid medical bills among Americans aged 65 and older totaled nearly $54 billion, with 7% of adults in this age group having unpaid medical bills.

Student loan debt, while less common, is a growing concern for older adults, often incurred for their own education or to assist family members. In 2022, 3.5 million Americans over 60 held student loan debt, and approximately 6% of adults aged 50 and older carry this type of debt.

Factors Influencing Retiree Debt Status

Several factors contribute to whether retirees carry debt or achieve a debt-free status. Financial planning habits established prior to retirement play a significant role. Individuals who consistently save and prioritize debt reduction during their working years are generally better positioned for a retirement with fewer financial obligations. The stability and nature of income sources in retirement also heavily influence debt levels.

Retirees often rely on fixed incomes from sources such as Social Security and pensions. While Social Security benefits typically include cost-of-living adjustments, many private pensions do not, causing their purchasing power to diminish over time due to inflation. Inflation directly erodes the value of fixed incomes and savings, making it more challenging for retirees to cover rising living costs like housing, food, and transportation without incurring debt.

Healthcare costs represent another major factor impacting retiree debt. Even with Medicare coverage, out-of-pocket expenses for premiums, copayments, deductibles, and long-term care can be substantial. Healthcare inflation often outpaces the general inflation rate, leading to rapidly increasing medical expenses that can deplete savings or necessitate taking on debt.

Unexpected major life events and expenses can also compel retirees to incur debt. These can include significant home repairs, assistance for adult children or grandchildren, or personal health emergencies not fully covered by insurance. 87% of older adults attribute their credit card debt to unexpected expenses.