How Rising Debt and Medical Costs Are Forcing Older Americans to Rethink Retirement Plans

For Valerie Towe, 65, and her 77-year-old husband, Paul, retirement was supposed to be a time of stability. Instead, it has become a financial balancing act, with credit card debt piling up as medical expenses and everyday costs soar.

Paul’s chronic obstructive pulmonary disease, rheumatoid arthritis, and neuropathy require ongoing treatments, medications, and specialist visits—all of which come with hefty out-of-pocket costs. To stay afloat, Valerie found herself relying more and more on credit cards.

“I just couldn’t make ends meet,” she told Yahoo Finance. “Between medical bills and the cost of groceries nearly doubling, I had no choice.”

On top of that, Valerie had to cut back to part-time work to care for her husband. The shift reduced her income, making it even harder to keep up with rising expenses.

The Burden of High-Interest Debt

Like millions of Americans, the Towes found themselves trapped in a vicious cycle. With interest rates on credit cards exceeding 20%, paying only the minimum balance each month caused their debt to balloon—now approaching $30,000.

Unfortunately, their story is far from unique. According to a new AARP report, nearly 50% of adults aged 50 and older who carry credit card debt use it to cover basic living expenses, such as groceries, rent, and healthcare. The problem is getting worse:

• 30% of older adults report having more credit card debt now than they did a year ago.
• Nearly half owe at least $5,000, while 28% carry a balance of $10,000 or more.

Credit Card Debt vs. Retirement Savings

For older workers nearing retirement, this level of debt creates an impossible dilemma: Should they focus on paying down debt or saving for retirement?

“Many older Americans who hope to retire soon will have to make tough choices,” said Indira Venkat, senior vice president of research at AARP. “For those already retired and living on fixed incomes, juggling credit card payments while covering essential costs is a major challenge.”

This financial strain is evident in new data from the Employee Benefit Research Institute (EBRI):

• In 2024, nearly 70% of retirees with debt reported carrying credit card balances—a sharp rise from just 40% four years ago.
• One of the biggest drivers of this debt? Out-of-pocket medical expenses, including prescription medications, dental care, and vision care.

Lessons from Retirees: The Regret of Carrying Debt

Looking back, many retirees regret not tackling their debt sooner. A recent Fidelity Investments report found that nearly one in four retirees wishes they had prioritized paying off credit cards and other debts before leaving the workforce.

With inflation pushing up the costs of everyday necessities—from housing to healthcare—many older Americans find themselves stuck in a cycle of debt at the very moment they should be enjoying financial security.

What Can Be Done?

If you’re approaching retirement and struggling with debt, financial experts recommend:

1. Prioritizing high-interest debt: Focus on paying down credit cards with the highest interest rates first.
2. Exploring lower-interest options: Consider balance transfer credit cards or personal loans with lower rates.
3. Cutting discretionary spending: Even small reductions in non-essential expenses can free up extra cash.
4. Seeking financial guidance: A credit counselor or financial planner can help create a realistic debt payoff strategy.

For millions of older Americans, tackling credit card debt is now a race against time—one that could determine the quality of their retirement years.

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