Researcher alarms on the rise of credit card debt among retirees.

• Since 2022, the percentage of retirees with credit card debt has significantly increased, as reported by the Employee Benefit Research Institute.
• Due to the pandemic, one researcher stated that inflation has caused credit card interest rates to reach their highest levels.
• Financial advisors offered some tips for retirees to whittle down their debt.

The percentage of Americans carrying credit card debt into retirement has significantly increased, which is a concerning financial development, particularly for those with limited financial flexibility, experts warned.

In 2024, 68% of retirees had outstanding credit-card debt, which is a "substantial" increase from 40% in 2022 and 43% in 2020, as per a new poll by the Employee Benefit Research Institute.

EBRI research strategist Bridget Bearden found it concerning for retirees on a fixed income, based on survey data analysis.

Inflation is the 'true driver'

Bearden stated that inflation is the "actual cause" of retirees' increased use of credit cards.

But it's not just retirees.

In summer 2024, EBRI surveyed 3,661 retirees aged 62 to 75 and found that approximately 83% were receiving Social Security benefits, with the average person deriving about half of their income from this source.

An 'expensive form of borrowing'

A May 2024 analysis by the Federal Reserve Bank of St. Louis stated that credit cards, which have high interest rates, are an "expensive form of borrowing."

As interest rates have surged to unprecedented levels, the cost of them has increased.

In August 2024, the federal reserve reported that consumers paid a 23% rate on their balances, an increase from approximately 17% in 2019.

The U.S. Federal Reserve increased interest rates to combat high inflation, resulting in a rise in rates.

In November 2023, the Federal Reserve Bank of St. Louis reported that the average household with credit card debt was paying $106 a month in interest alone.

Retirees' debt was rising before the pandemic

Rising debt levels were a problem for older Americans even before pandemic-era inflation.

A study published in August by the EBRI found that American families who are just retiring or have recently retired have higher levels of debt compared to past generations, with those reaching retirement having more debt.

An increasing number of families are struggling with debt during their working years, which persists into and throughout retirement, according to a report.

1. Reduce expenses

Financial advisors suggested several ways for retirees to manage their credit-card debt.

Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners in Jacksonville, Florida, stated that the first step to getting out of debt is to determine the reason for accumulating debt in the first place. She is also a member of CNBC's Financial Advisor Council.

To avoid future financial difficulties, McClanahan advised that if a cardholder's income does not cover their basic expenses or if they need to borrow money for a significant event like a home repair or medical procedure, they should consider making lifestyle changes to reduce expenses.

• Make sure you don't have useless subscriptions or apps;
• Conduct a home energy audit to identify opportunities to reduce your water, electric, or gas expenses.
• Eating out less and cooking more is a healthier and more cost-effective option.

CFP Ted Jenkin, founder of oXYGen Financial and a member of the CNBC Financial Advisor Council, stated that retirees have the option to make a significant lifestyle decision, such as relocating to an area with a lower cost of living.

To reduce credit card debt, any spending cuts should be applied, McClanahan advises. Consumers can utilize a debt repayment calculator to establish repayment objectives, she suggests.

2. Boost income

Advisors suggest that there may be some "low hanging fruit" that retirees are missing out on.

Winnie Sun, the co-founder of Sun Group Wealth Partners and a member of CNBC's Financial Advisor Council, suggests that individuals may be able to sell valuable items accumulated over the years, such as furniture, jewelry, and collectibles, through various platforms like Facebook Marketplace, Craigslist, or a garage sale.

To avoid living in debt, family members would prefer their elders to pass down items they hold onto, rather than keeping them, Sun said.

3. Reduce your interest rate

Sun advised cardholders to contact their credit card provider to inquire about lowering their interest rate.

Sun suggested that they transfer their balance to a card with a 0% interest-rate promotion to pay off their debt faster.

Consumers may consider transferring their debt into a home equity line of credit (HELOC) as it generally has lower interest rates, but it may take a month or so to establish with a lender. However, Sun advises working with a financial advisor to analyze if this is a good move for you, as a HELOC can also pose problems, especially for those who continue to overspend.

Jenkin stated that cardholders can decide if the taxes they'd pay on a retirement-account withdrawal would be less than their credit-card interest rate.

Jenkin suggested that paying off debt might be more logical if the interest rate is 20% or higher, and paying taxes first could help achieve this goal.