How the Pandemic Altered Americans' Debt Burden and Retirement Readiness

27 Pages Posted: 3 Nov 2022

See all articles by Andrea Hasler

Andrea Hasler

George Washington University - School of Business

Annamaria Lusardi

Stanford University - Stanford Institute for Economic Policy Research

Olivia S. Mitchell

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

Date Written: February 1, 2022

Abstract

This paper analyzes Americans’ perceptions of being debt constrained. We focus on which population subgroups reported feeling most debt constrained, how this perception was impacted by the COVID-19 pandemic, and how it relates to financial literacy and retirement readiness. To this end, we analyze two datasets, namely the 2020 and 2021 TIAA Institute-GFLEC Personal Finance Index files (P-Fin Index). The evidence shows that, prior to and during the pandemic, one in three American adults felt constrained by their debt. The percentage was even higher among vulnerable subgroups such as Black and Hispanic individuals, those lacking a bachelor’s degree, those with lower incomes, and those with low levels of financial literacy. Being debt constrained also has long-term financial consequences, as it is negatively linked to planning and saving for retirement. Finally, we show that financial literacy has a strong connection to both debt and retirement money management, confirming that financial knowledge is essential if people are to be able to manage their debt and build financial well-being.

Keywords: Financial Planning, Household Assets, Personal Savings, Retirement Account, Debt, Pandemic

JEL Classification: D14, G51, J32

Suggested Citation

Hasler, Andrea and Lusardi, Annamaria and Mitchell, Olivia S., How the Pandemic Altered Americans' Debt Burden and Retirement Readiness (February 1, 2022). TIAA Institute Research Paper Series No. 01, 2022, Available at SSRN: https://ssrn.com/abstract=4266132 or http://dx.doi.org/10.2139/ssrn.4266132

Andrea Hasler (Contact Author)

George Washington University - School of Business ( email )

Washington, DC 20052
United States

Annamaria Lusardi

Stanford University - Stanford Institute for Economic Policy Research ( email )

366 Galvez Street
John A. and Cynthia Fry Gunn Building
Stanford, CA CA 94305
United States

HOME PAGE: http://siepr.stanford.edu/people/annamaria-lusardi

Olivia S. Mitchell

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

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

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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