John O'Connor

We’re hearing more about the need for operators to embrace innovation and create better choices for the next wave of senior living customers. Perhaps rightfully so. Conventional wisdom tells us that many existing options will not cut it as more discriminating customers arrive.

But maybe it’s also time for operators to start giving more thought to a fundamental question: Will my future customers be able to pay?

A sobering report from the Employee Benefit Research Institute helps show why this may be a challenge. Investigators found that a growing number of older American families had debt in 2013 (the most recent year for which information is available). In fact, among households with family heads aged 55 or older, debt was up to 65.4% in 2013. As recently as 1992, the level was 53.8%. As trends go, that’s not a good one.

And if these findings were not alarming enough, investigators also discovered the percentage of these families with debt payments greater than 40% of income — a traditional red flag threshold — increased in 2013 to 9.2% from 8.5%in 2010. The primary culprit is money owed for homes.

“The debt levels among those with housing debt have obvious and serious implications for the future retirement security of these Americans,” said Craig Copeland, EBRI senior research associate and the study’s author.

Put another way, people at risk of losing their homes may not be in a very good position to move into yours.

Not that this report is the only troubling yardstick. Nationwide, a quarter of all retired Americans rely exclusively on Social Security for income. And a 2012 Gallup survey found that nearly six in ten Americans are worried that they will not be able to maintain their standard of living in retirement.

Yes, aging boomers will swell the ranks of the elderly. And they’ll clamor for new bells and whistles. But what if many of these new arrivals simply can’t afford what you are selling?

John O’Connor is the Editorial Director at McKnight’s.