Understanding Debt in the Older Population

37 Pages Posted: 18 Feb 2020 Last revised: 7 May 2020

See all articles by Annamaria Lusardi

Annamaria Lusardi

George Washington University - Department of Accountancy; National Bureau of Economic Research (NBER)

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; University of Pennsylvania - The Wharton School, Pension Research Council; National Bureau of Economic Research (NBER)

Noemi Oggero

University of Turin

Date Written: May 5, 2020

Abstract

Poor financial capability can have important consequences for wellbeing in later life. To explore aspects of financial management related to debt, we have designed and analyzed a new module in the 2018 Health and Retirement Study (HRS). We use these new data, along with information from the 2018 National Financial Capability Study (NFCS), to evaluate the factors associated with debt and debt management close to retirement. We show that a sizeable proportion of older Americans carry debt in the form of student loans and unpaid medical bills. We also find that women and Nonwhites are more likely to report feeling financially distressed, across a range of self-assessed measures. In addition, we see that having children contributes to older persons’ indebtedness, even on the verge of retirement. Negative income shocks are predictive of negative financial perceptions and behaviors such as feeling over-indebted, being contacted by a debt collector, having student loans for themselves or partners, and carrying medical debt. By contrast, the more financially literate have more positive financial perceptions and behaviors. Specifically, being able to answer one additional financial literacy question correctly is associated with a higher probability by 3-6 percentage points of reporting an above average credit record and planning for retirement. Therefore, people also need financial knowledge to limit their debt exposure at older ages.

Keywords: Older adults, debt, financial knowledge, financial literacy, National Financial Capability Study (NFCS), Health and Retirement Study (HRS)

Suggested Citation

Lusardi, Annamaria and Mitchell, Olivia S. and Oggero, Noemi, Understanding Debt in the Older Population (May 5, 2020). Wharton Pension Research Council Working Paper No. 2020-04, Available at SSRN: https://ssrn.com/abstract=3537858 or http://dx.doi.org/10.2139/ssrn.3537858

Annamaria Lusardi

George Washington University - Department of Accountancy ( email )

George Washington University School of Business
Washington, DC 20052
United States

HOME PAGE: http://business.gwu.edu/profiles/annamaria-lusardi/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Olivia S. Mitchell (Contact Author)

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

University of Pennsylvania - The Wharton School, Pension Research Council ( email )

3302 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Noemi Oggero

University of Turin ( email )

Corso Unione Sovietica 218 bis
Torino, Turin 10134
Italy

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