Debt Close to Retirement and Its Implications for Retirement Well-being
Opportunities to borrow increased considerably in the U.S. over the past few decades, and many Americans today are approaching retirement with high levels of debt.
Older people (age 56-61) holding uncollateralized debt carrying high interest rates tend to be among those most subject to financial distress. Yet many people carry such debt into and through retirement. This study investigates three potential reasons for this troubling behavior: low financial literacy, lack of information and behavioral biases. The authors explain how each of these factors can lead older persons to hold excessive debt and the implications for their retirement well-being.
The study’s authors use data from the 2015 wave of the National Financial Capability Study to examine the various types of debt people held close to retirement and the rationale for people’s financial decisions.