Near retirement? One hidden expense is quietly squeezing Americans preparing to leave work behind

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If you’re having trouble making ends meet and finding it difficult to build wealth, you’re not alone. Many American households have struggled with affordability for years. Inflation often gets the blame, but it isn’t the only factor putting pressure on incomes.

A Federal Reserve analysis of the 2025 Survey of Consumer Finances points to another major pressure point: the rising cost of borrowing in the U.S.

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According to the report, the average interest rate on a 30-year fixed mortgage climbed from 4.2% to 6.7% between 2022 and 2025. Over the same stretch, the average rate on a new car loan rose from 4.9% to 7.7%, and the average credit card rate jumped from 14.6% to 21.4%.

Those higher borrowing costs helped push the median debt payment-to-income ratio up by 2.0 percentage points, reaching 15.4%. That measure shows how much of a household’s income goes toward debt payments, so a higher figure means more income is being absorbed by monthly obligations.

The takeaway is that borrowing costs, alongside inflation, may be quietly draining Americans’ finances — especially for people getting close to retirement. Yet while many households are feeling squeezed, others have seen meaningful gains in wealth.

If you’re not among the winners, there may still be steps you can take to improve your position. Here’s how to protect your money.

Not everyone is benefiting equally

The Fed’s review of the 2025 SCF also showed that rising borrowing costs were only part of the story.

During the period covered by the analysis, real gross domestic product expanded at an annual pace of 2.5%, the civilian unemployment rate increased from 3.7% to 4.2%, and inflation averaged 3.6% as measured by the Consumer Price Index.

Even with those conditions, real median family income rose 7%, and real median net worth increased 2%.

Still, the gains were uneven, and age played a big role. Median net worth rose just 3% for Americans ages 55 to 64, fell 4% for those ages 65 to 74, and increased 37% for Americans 75 and older.

Why the difference? Part of the answer may be how borrowing costs affect people at different stages of life.

Someone in their mid-70s, for instance, has had decades to accumulate assets and may already have paid off a mortgage. By contrast, people in their 50s and 60s may still be carrying debt while having less time to build up savings.

Experian’s 2025 data on average debt by generation supports that picture. Millennials ages 29 to 44 carried an average of $123,280 in debt, Gen Xers ages 45 to 60 carried $158,105, baby boomers ages 61 to 79 carried $92,619, and the Silent Generation ages 80 and older carried $38,460.

Gen X stands out as the most debt-burdened generation, which could make its members especially vulnerable to higher borrowing costs. That not only raises monthly expenses, but also leaves less money available for saving and investing at a time when retirement is approaching.

How to deal with debt

If debt payments are eating into your income, there are ways to get ahead of them.

Start by listing every debt you have, along with the balance, interest rate, and monthly payment. From there, a debt payoff strategy can help. The avalanche method targets the highest-interest balance first, while the snowball method focuses on the smallest balance first.

If you use the avalanche method, credit cards may be your most expensive debt. LendingTree says the average credit card rate is 23.96%, matching its highest level since December 2025.

Credit card rates are high and variable, which means they could move even higher if interest rates keep climbing.

One possible solution is a balance transfer to a card offering a low or 0% introductory rate. That can help you pay down debt faster, but make sure you understand when the regular rate will kick in again.

A personal loan with a lower rate could also help, as long as you can handle the monthly payments.

For example, you could consolidate debt into a personal loan through Credible. That would replace multiple monthly bills with one predictable payment.

Credible allows you to compare rates from multiple lenders with just a few clicks. In minutes, you can see which lenders are willing to help you pay off credit cards or other debts with a single personal loan.

If you owe a large amount, you may also want to check whether you qualify for a debt relief program that could reduce a sizable portion of what you owe.

With Freedom Debt Relief, you can speak with a certified debt relief consultant for free and learn how much you might save. If you qualify, they can negotiate settlements with your creditors until the debt you enroll is resolved.

Consider professional guidance

Once your debt is under control, the next step may be building assets to grow your net worth. A financial advisor can help you run the numbers and create a plan.

Because hiring an advisor is usually a long-term relationship, finding the right match matters.

If you’re not sure where to begin, Advisor.com can connect you with a nearby expert at no cost.

Advisor.com vets advisors based on their track record, client ratios, and regulatory history. Its network also includes fiduciaries, who are legally required to act in your best interests.

After you share a few details about your finances and goals, Advisor.com’s AI-powered matching tool can connect you with a qualified professional suited to your needs.

You can also schedule a free initial consultation with no obligation to hire, so you can decide whether the match is right for you.

Strengthen your investments

Not everyone wants to hand over control of their finances. But even if you prefer to manage your own portfolio, expert research can still be useful.

Platforms like Moby provide research and recommendations designed to help identify strong long-term investments, with guidance from former hedge fund analysts.

Moby’s team spends hundreds of hours reviewing financial news and data to deliver stock and crypto reports directly to users. Their research can help you stay current on market changes and take some of the guesswork out of choosing stocks and ETFs.

Over four years and nearly 400 stock picks, their recommendations have outperformed the S&P 500 by almost 12% on average. They also offer a 30-day money-back guarantee.

The reports are written in a way that is easy for beginners to understand, so you can become a more informed investor in just a few minutes.

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Article Sources

U.S. Federal Reserve (1); Experian (2), (3); Ramsey Solutions (4); LendingTree (5)