Top States Where Seniors Carry Debt

Borrowing, Credit Cards, Credit Rating

Debt is no picnic at any age, but it’s particularly rough on senior citizens. Most are nearing their retirement years or have already retired with little time (or money) to pay down debts.

Seniors tend to have better access to more credit if they need it. Their average credit score is 745, well above the national average of 701. That’s both good and bad news. Better access to credit can tempt seniors into increasing debt or letting credit ride throughout their retirement years when they have less income to avoid a debt spiral.

The credit reporting agency Experian finds that Americans aged sixty and above do have less debt than the average American – $70,633 compared to the $93,446 national average – but that’s still a troubling number given that most incomes will decrease during retirement years.

The amount of senior debt varies widely by state, ranging from the District of Columbia’s highest average senior debt at $132,366 to West Virginia’s lowest senior debt burden of $38,358.

Why is there such variation by state? Experian’s study doesn’t dig into the reasons, but housing costs are one of the most likely causes. Mortgage loans are the largest debts most people will take on in their lifetimes. Some seniors may have paid off their homes, but others may be relocating or buying a vacation/retirement property, extending greater debt into their senior years.

Cost of living is another logical geographic factor. Areas with high costs of living are more likely to cause consumers to accumulate debt over their lifetime and make it harder to pay down existing debts.

States with the top three debts fit this scenario well. California comes in second to the District of Columbia with $131,184 in average debt, and Hawaii is third with $130,250. Those are the three states with the highest cost of living and the highest median home listing prices in the nation.

The rest of the top ten average senior debt list includes Maryland ($100,317), Colorado ($98,002), Nevada ($92,692), Washington ($91,686), Virginia ($89,406), Arkansas ($84,627), and Massachusetts ($83,915). Most have relatively high home prices and costs of living – although Arkansas is an anomaly, with both the third lowest cost of living and median home listing price.

The lower end of the senior debt spectrum follows suit. Mississippi’s seniors have the second lowest debt at $38,562. West Virginia has the lowest median home listing price, with Mississippi not far behind – and Mississippi tacks on the lowest cost-of-living expenses.

If you’ve already retired or are nearing retirement, you must keep debt under control. That may require changes in lifestyle or retirement plans, especially if you plan to live in a state with a high cost of living. Realistic budgeting is even more important during the fixed-income years. You must be cautious with spending to avoid racking up high-interest credit card debt. If you want to reduce your interest payments and lower your debt, join MoneyTips and use our free Debt Optimizer tool.

Younger Americans still have time to adjust retirement plans to reduce debt and increase retirement fund savings. Consider your current retirement plans. Are they realistic with respect to income and expenses, including the cost of living where you plan to retire?

Debt isn’t necessarily bad, even in retirement. However, you must keep debt under control – and where you live affects your ability to stay out of debt. If you plan to relocate in an area with a higher cost of living, make sure that your budget accounts for the higher expenses. Keep your credit score as high as possible to get the best interest rate offers on any new debt that you have to take on.

People with better credit can save more for retirement because they pay less in interest. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.

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