Understanding Debt in the Older Population

32 Pages Posted: 18 Feb 2020 Last revised: 11 Dec 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

Multiple version iconThere are 3 versions of this paper

Date Written: December 10, 2020

Abstract

Poor financial capability can erode well-being in later life. To explore debt and debt management among older Americans, age 51-61, we designed and analyzed a new module in the 2018 Health and Retirement Study along with information from the 2018 National Financial Capability Study. Even though this group should be at the peak of their retirement saving, it nevertheless carries debt due to student loans and unpaid medical bills; having children also contributes. By contrast, the 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 of reporting an above average credit record and planning for retirement. Higher financial literacy is also linked to being less likely to carry excessive debt, being contacted by debt collectors, and carrying medical debt or student loans, even after accounting for a large range of demographics and other characteristics. Evidently, financial knowledge can help limit debt exposure at older ages.

Keywords: Retirement, debt, medical bills, student loans, mortgages, financial literacy, financial fragility

JEL Classification: G40, G41, G51, G53, H31

Suggested Citation

Lusardi, Annamaria and Mitchell, Olivia S. and Oggero, Noemi, Understanding Debt in the Older Population (December 10, 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
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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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