Unexpected medical expenses make up the leading single source of debt for retirees, according to a new Millionaire Corner survey examining factors in personal debt among investors from a range of ages and wealth levels.
One-fourth of retirees incur debt due to unexpected medical expenses, according to the results of our April poll. Education costs – the primary source of debt for working Americans – was a factor for less than 8 percent of retirees. The retired demographic was also less likely than working Americans to incur debt through divorce and “unrestrained personal spending,” but more likely to have debts related to the death of a spouse.
Health care costs pose a particular burden to the nation’s retirees, according to federal data that shows that senior citizens spend a disproportionately high percentage of their income on health care costs, which continue to rise faster than the overall rate of inflation.
Though retirees are more likely than working Americans to go into debt over medical bills, nearly 22 percent of overall investors participating in our April survey identify unexpected medical expenses as a source of debt. Similar findings were reported in a study released by the Centers for Disease Control in March. According to the study, based on national health data collected between January and June of 2011, one in five American families have difficulty paying medical bills.
More than one-fourth of families have medical bills they are paying in installments, and more than 10 percent have medical bills they are unable to pay at all, according to the study, which found that one-third of American households feel that medical expenses put a financial burden on the family.
Unexpected medical expenses were also a significant source of debt for the least affluent families surveyed by Millionaire Corner – those with investable assets of less than $100,000. Education costs, followed by job loss and pay cuts, are the leading source of debt for the least affluent investors, and affect 37 percent and 31 percent, respectively. Medical bills are the third most common source of debt, affecting 26 percent of the least affluent.
Investors ages 40 and younger are also at a higher risk of incurring debt due to unexpected medical expenses, the second most common source of debt, affecting 25 percent of the youngest demographic. The only source of debt more common to the gen x and gen y cohort is student debt, a source of debt for 44 percent of the younger generations.
Retirees are less likely than working Americans to identify an underwater mortgage, or job loss or pay cuts as a source of debt.