Number of Families with Debt Remains Stagnant

April 27, 2004 ( payments relative to income and debt levels relative to assets in 2001 have not changed since 1992 for American families headed by someone age 55 or older, according to a new report by the Employee Benefit Research Institute (EBRI).

Fifty-six percent of American families headed by someone age 55 or older said they had debt in 2001, EBRI reports, a figure approximately unchanged from 1992. However, the average debt level has increased by approximately 40%, from about $27,500 in 1992 to almost $39,000 in 2001, according to a press release. Especially in the oldest age groups, heavily indebted families, those with debt payments exceeding 40% of income have also increased, ranging from 5% to 10% of all near elderly and elderly families.

Housing, according to the EBRI data, makes up a growing proportion of family debt; it represented about 57% of family debt payments in 1992, then jumped to 63% in 2001. EBRI notes this could stem from an increase in housing prices, low interest rates leading to much refinancing, and home equity that wrap otherwise nondeductible consumer and nonhousing debt into a deductible home mortgage loan, the press release said.

Debt payments to income and debt to assets are the two ratios EBRI uses to gauge family debt load. These vary significantly between families, and EBRI data show younger, higher income, more educated, and higher net-worth family heads having higher ratios of debt, though debt to assets decreases with the age of the family head. The debt payments relative to income ratio remained stagnant between 1992 and 2001, at 9%, while the debt to assets ratio decreased slightly during that time, from 7% to 5.8%.

When debt to income is high for young families, that is considered acceptable since there are many years to pay off the debt. However, when debt to assets is high in older families, it is a risk since those families are often depending on assets to fund retirement.

The EBRI report, based on data derived from the Federal Reserve’s Survey of Consumer Finances, will be available at .